Cash holdings in the time of financial crisis

Yanhao Chang (2011). Cash holdings in the time of financial crisis Honours Thesis, UQ Business School, The University of Queensland.

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Yanhao_Chang_BCom_Hons_Thesis.pdf Honours Thesis application/pdf 982.00KB 18
Author Yanhao Chang
Thesis Title Cash holdings in the time of financial crisis
School, Centre or Institute UQ Business School
Institution The University of Queensland
Publication date 2011-10-27
Thesis type Honours Thesis
Supervisor Associate Professor Karen Benson
Total pages 119
Language eng
Subjects 1502 Banking, Finance and Investment
Abstract/Summary This study examines the impact of cash holdings on financing investments and firm value using data from publicly traded U.S. firms over the period from 1990 to 2010. This issue is investigated in the context of the financial crisis compared to the pre-crisis period. The theoretical ground for this study is market imperfections. The sample is classified based on firm’s financial constraint status. In light of the substantial reduction in bank lending and the higher information asymmetry during the crisis, a set of hypotheses is developed. We provide empirical evidence that firms rely more on internal liquidity to finance their investments in the presence of greater market imperfections. We also find evidence that the equity market places a higher value on corporate cash holdings during the financial crisis. We present some evidence that the value of cash varies with financial constraint status, but the pattern appears to be less pronounced during the crisis. There is little evidence that the constraint effect on investments is affected by the financial crisis.
Keyword Cash holdings
Financial crisis
Market imperfections
Financial consultant
Firm value

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Created: Thu, 28 Jun 2012, 15:13:45 EST by Karen Morgan on behalf of UQ Business School