Download Now Free registration required
The paper explores factors that lead to accumulation or decumulation of firms' cash reserves. In particular, the authors empirically examine whether additional future fixed capital and R&D investment expenditures induce firms to change their liquidity ratio while considering the role of market imperfections. Implementing a dynamic framework on a panel of US, UK and German companies, they find that firms make larger adjustments to cash holdings when they plan additional future R&D rather than fixed capital investment expenditures. This behavior is particularly prevalent among financially constrained firms that are heavily involved in R&D activities.
- Format: PDF
- Size: 190 KB