NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

The Evolution of Corporate Cash

John R. Graham, Mark T. Leary

NBER Working Paper No. 23767
Issued in September 2017
NBER Program(s):Corporate Finance Program

We put the recent increase in corporate cash in historic perspective by studying nearly 100 years of average and aggregate cash holdings. Corporate cash more than doubled in the first 25 years of our sample before returning to 1920 levels by 1970. Since then, average and aggregate patterns diverge. To understand these patterns, we examine both time-series and cross-sectional variation in cash policies and draw several conclusions. First, the increase in average cash ratios since 1980 is driven entirely by a shift in the cash policies of new entrants, while within-firm changes have been negative or flat since WW II. Second, the cross-sectional relations documented on modern data are remarkably stable back to the 1920s. Third, despite the stability of these relations, firm characteristics explain little of the time series variation in aggregate cash holdings over the century. Macroeconomic conditions, corporate profitability and investment, and (since 2000) repatriation tax incentives help fill this gap.

download in pdf format
   (992 K)

email paper

A non-technical summary of this paper is available in the December 2017 NBER Digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23767

Published: John R Graham & Mark T Leary, 2018. "The Evolution of Corporate Cash," The Review of Financial Studies, vol 31(11), pages 4288-4344.

Users who downloaded this paper also downloaded* these:
Foster and Rosenzweig w23909 Are There Too Many Farms in the World? Labor-Market Transaction Costs, Machine Capacities and Optimal Farm Size
Begenau and Palazzo w23249 Firm Selection and Corporate Cash Holdings
Faulkender, Hankins, and Petersen w23799 Understanding the Rise in Corporate Cash: Precautionary Savings or Foreign Taxes
Costa-Font, Frank, and Swartz w23781 Access to Long-Term Care After a Wealth Shock: Evidence from the Housing Bubble and Burst
Mayda, Ortega, Peri, Shih, and Sparber w23902 The Effect of the H-1B Quota on Employment and Selection of Foreign-Born Labor
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us