Innovation and Corporate Cash Holdings in the Era of Globalization

Adler, Konrad; Ahn, JaeBin; Dao, Mai

doi:10.5089/9781484392164.001

Cited by 4 publications

(4 citation statements)

References 38 publications

(64 reference statements)

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“…Most likely, technology and/or globalization play an important role in this context. There is a rapidly evolving literature on the impact of globalization on innovation activity (Autor et al (2016), Bloom et al (2016)), and work by Adler et al (2017) which shows that globalization, by boosting incentives to engage in risk-enhancing innovation, can jointly raise innovation activity and cash holding particularly among export-oriented firms. However, technology and globalization likely are not the only drivers for the corporate saving trends documented in this paper.…”

Section: Discussion Of Mechanismsmentioning

confidence: 99%

The Rise in Corporate Saving and Cash Holding in Advanced Economies:

Dao¹,

Maggi²

2018

IMF Working Papers

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Section: Discussion Of Mechanismsmentioning

confidence: 99%

The Rise in Corporate Saving and Cash Holding in Advanced Economies:

Dao¹,

Maggi²

2018

IMF Working Papers

Self Cite

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“…While firms loaded with relatively more liquid assets may attract, from time to time, more investors' and lenders' attention than firms with low levels of cash, the formerby holding cash-may miss investment opportunities and-prospectively-be less profitable than the latter. Indeed, investors may take the excessive amount of cash as a sign that opportunities for significant growth no longer exist or that, in an imperfect information environment, agency problems do exist, and the stock price may be poised to decline (Gilchrist and Himmelberg 1995;Gilchrist et al 2009, Adler et al 2019.…”

Section: Introductionmentioning

confidence: 99%

Does too much liquidity generate instability?

Calcagnini

Gardini

Giombini

et al. 2020

J Econ Interact Coord

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Corporate demand for cash is related to a number of firm-specific characteristics, like the presence of transaction costs, information asymmetry in credit markets, uncertainty and risk aversion. The purpose of this paper is to build a dynamic model that describes the potential chaotic effects of the accumulation of cash by firms over a prolonged period of time. By exploring the theoretical connections between firm financial policies and investment decisions, we show that too much liquidity might generate economic instability. When firm increases the share of cash devoted to risky investment, and reduces the share of cash distributed to shareholders as dividends, the fixed point of the system changes from being stable to being unstable. Moreover, the impact of such a policy on the stability of the system is larger the greater the investment risk. The chaotic behavior is mainly observable in the dynamics of cash, which in turn may affect all investment decisions.

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“…Studies in the past have investigated CH either in developed (Opler et al, 1999;Ozkan and Ozkan, 2004;Foley et al, 2007;Denis and Sibilkov, 2010;Al-Najjar and Belghitar, 2011;Bigelli and S anchez-Vidal, 2012;Yu-Thompson et al, 2016;Gu, 2017;Devos and Rahman, 2018;Belkhir et al, 2018;Adler et al, 2019) or in developing (Wasiuzzaman, 2014;Megginson et al, 2014;Kusnadi et al, 2015;Mohd et al, 2015;Liu et al, 2015;Abdioglu, 2016;Shabbir et al, 2016;Xu et al, 2016;Khattak et al, 2017) financial markets. Few others have investigated the international sample to explore the CH motives (Dittmar et al, 2003;Ferreira and Vilela, 2004;Garc ıa-Teruel and Mart ınez-Solanoi, 2008;Drobetz et al, 2010;Al-Najjar, 2013;Hall et al, 2014;Pinkowitz et al, 2016;Seifert and Gonenc, 2016;Al-Najjar and Clark, 2017;Chen et al, 2018;Mortal et al, 2019;Caprio et al, 2019;Akhtar et al, 2021aAkhtar et al, , 2023Akhtar, 2022b).…”

Section: Introductionmentioning

confidence: 99%

“…, 2016; Gu, 2017; Devos and Rahman, 2018; Belkhir et al. , 2018; Adler et al. , 2019) or in developing (Wasiuzzaman, 2014; Megginson et al.…”

Section: Introductionmentioning

confidence: 99%

Are the motives of holding cash differing between developed and emerging financial markets?

Akhtar

2023

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PurposeThis study compares the motives of holding cash between developed (Australian) and developing (Malaysian) financial markets.Design/methodology/approachFor the period 2006–2020, the t-test, fixed-effect and generalised method of moment (GMM) model have been applied to a sample of 1878 (1,165 Australian and 713 Malaysian) firms.FindingsThe empirical results reveal that firms in developed financial markets hold higher cash compared to the developing financial markets. The findings confirm that motives to hold cash differ between developed and developing financial markets. The GMM findings further show that cash holdings (CH) in Australia are higher due to higher ratios of cash flow, research and development (R&D) and return on assets (ROA), and lower due to larger dividend payments. In the Malaysian market, however, cash flows and R&D are ineffectual, ROA falls and dividend payments rise CH.Practical implicationsThe study helps managers, practitioners and investors understand that firms' distinct economic, institutional, accounting and financial environments are important. To attain the desired outcomes, they must thus comprehend and consider these considerations while developing suitable liquidity strategies.Originality/valueTo the authors' best knowledge, this is the initial research demonstrating how varied cash motives and their ramifications are in developed and developing financial markets. Therefore, this study identifies the importance that CH motives varied among financial markets and that findings from a particular market cannot be generalised to other markets because of the market and financial structural variations.

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Innovation and Corporate Cash Holdings in the Era of Globalization

Cited by 4 publications

References 38 publications

The Rise in Corporate Saving and Cash Holding in Advanced Economies:

The Rise in Corporate Saving and Cash Holding in Advanced Economies:

Does too much liquidity generate instability?

Are the motives of holding cash differing between developed and emerging financial markets?

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