Corporate cash holding and firm value

This study contrasts the effect of cash holding on firm value for a sample of US industrial firms during 2001-2007. The study tests empirically for the existence of an optimal cash level that maximizes firm value. Second, the study analyses whether or not deviations from the optimum cash level reduc...

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Bibliographic Details
Published inApplied economics Vol. 45; no. 2; pp. 161 - 170
Main Authors Martínez-Sola, Cristina, García-Teruel, Pedro J., Martínez-Solano, Pedro
Format Journal Article
LanguageEnglish
Published London Routledge 01.01.2013
Taylor and Francis Journals
Taylor & Francis Ltd
Taylor & Francis (Routledge)
SeriesApplied Economics
Subjects
Asymmetric information
Business management
Business valuation
Cash flow
cash holdings
Cash management
Correlation
Economic models
Empirical research
Financing methods
Firm value
Industrial enterprises
Quantitative Finance
Studies
U.S.A
United States > US
Social Sciences & Humanities
Online AccessGet full text
ISSN0003-6846
1466-4283
DOI10.1080/00036846.2011.595696

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Summary:This study contrasts the effect of cash holding on firm value for a sample of US industrial firms during 2001-2007. The study tests empirically for the existence of an optimal cash level that maximizes firm value. Second, the study analyses whether or not deviations from the optimum cash level reduce firm value. The results show a concave relation between cash holding and firm value, verifying the existence of an optimum level of cash holding. Additionally consistent with the initial analysis, deviations above and below optimal cash holding decreases the firm value.
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ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2011.595696