Cash holdings in private firms

Evidence from a wide sample of Italian private firms shows that cash holdings are significantly related with smaller size, higher risk and lower effective tax rates, therefore supporting predictions from the trade-off model. More cash is also held by firms with longer cash conversion cycles and lowe...

Full description

Saved in:
Bibliographic Details
Published inJournal of banking & finance Vol. 36; no. 1; pp. 26 - 35
Main Authors Bigelli, Marco, Sánchez-Vidal, Javier
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier Sequoia S.A 01.01.2012
Subjects
Cash flow
Cash holdings
Cash management
Closely held corporations
Corporate finance
Dividends
Enterprises
Investment
Italy
Private sector
Studies
Trade-off
Italy
Online AccessGet full text

Cover

More Information
Summary:Evidence from a wide sample of Italian private firms shows that cash holdings are significantly related with smaller size, higher risk and lower effective tax rates, therefore supporting predictions from the trade-off model. More cash is also held by firms with longer cash conversion cycles and lower financing deficits, as predicted by the financing hierarchy theory. Reported evidence also shows that dividend payments are associated with more cash holdings, and both bank debt and net working capital represent good cash-substitutes. When controlling for macroeconomic and industry factors, some variables lose their significance, but the general findings are confirmed. Finally, cash-rich companies are found to be more profitable, to pay more dividends and to invest more in a medium-term future horizon. [PUBLICATION ABSTRACT]
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2011.06.004