Title: A global look into corporate cash after the global financial crisis
Authors: Kei Ichiro Inaba - Bank of Japan (Japan) [presenting]
Abstract: The purpose is to investigate the developments and determinants of cash holdings by publicly traded firms for 20 advanced and emerging countries over the last decade. Ratios of the firms' aggregate cash to their total assets were on upward trends in the majority of the sample countries. Panel-data regressions find that higher cash ratios were associated with fewer non-cash current assets, smaller cost of carry, larger contemporaneous cash inflows, fewer interest-bearing liabilities, greater expected investment opportunities, including R\&D projects, larger uncertainty, and the state of corporate governance. The last one is related to the agency motive and, to be specific, higher cash ratios were associated with managers with worse ethicality, lower accountability to investors and board members, weaker investor protection, harsher auditing and reporting standards, and greater potential to face holdup behaviors taken by lending banks. The agency motive was greater than the precautionary and transaction-costs motives in terms of standardized impact while being marginal in terms of explanatory power over total variations in the cash ratios.