Corporate Cash Holding in Asia
In this paper, we analyze the determinants of corporate saving in the form of changes in the stock of cash for 11 Asian economies using firm-level data from the Oriana Database for the 2002-2011 period. We find some evidence that cash flow has a positive impact on the change in the stock of cash, which suggests that Asian firms are borrowing constrained and that they save more when their cash flow increases so that they will be able to finance future investments. Moreover, we find in the developed economy sample that, as expected, cash flow has a positive impact on the change in the stock of cash only in the case of the smallest firms, which are more likely to be borrowing constrained, and find in the developing economy sample that, as expected, the positive impact of cash flow on the change in the stock of cash declines with firm size. In addition, we find that the cash flow sensitivity of cash declined after the global financial crisis. Finally, we find some evidence that Tobin's q has a positive impact on the change in the stock of cash.
This paper was prepared for the Asian Development Bank TA 7428-REG on "Sustaining Asia's Growth and Investment in a Changing World." The authors are indebted to Maria Socorro Bautista, Kazuo Ogawa, and Noli Sotocinal and to Xiang Lin and the other participants of the Ninth Annual Conference of the Asia-Pacific Economic Association (APEA) 2013, held in Osaka, Japan, on July 27-28, 2013, for their valuable comments and to Romana Domingo for her superb assistance. Any remaining errors are the authors'. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Charles Yuji Horioka & Akiko Terada-Hagiwara, 2014. "Corporate Cash Holding in Asia," Asian Economic Journal, East Asian Economic Association, vol. 28(4), pages 323-345, December. citation courtesy of