CORPORATE CASH HOLDING AND FIRM VALUE

Cristina Martinez-Sola (1) , Pedro J Garcia-Teruel (2) , Pedro Martinez-Solano (3)

1 ACCOUNTING AND FINANCE
2 MANAGEMENT AND FINANCE
3 MANAGEMENT AND FINANCE

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. Secondly, the study analyzes 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, and consistent with the initial analysis, deviations above and below optimal cash holding decrease firm value.

Mots clés: Social Sciences & Humanities

Domaines: Économie et finance quantitative [q-fin]

Cristina Martinez-Sola, Pedro J Garcia-Teruel, Pedro Martinez-Solano. CORPORATE CASH HOLDING AND FIRM VALUE. Applied Economics, 2011, 45 (02), pp.161-170. ⟨10.1080/00036846.2011.595696⟩. ⟨hal-00732524⟩