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

Dao, Mai; Maggi, Chiara

doi:10.5089/9781484385395.001

Cited by 20 publications

(33 citation statements)

References 31 publications

(49 reference statements)

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“…The relevance of the intensive margin for the rising trend in cash holdings is consistent with the role of within-firm increase in net saving rates (retained earnings) documented in Chen et al (2017) and Dao and Maggi (2018).…”

Section: Stylized Factssupporting

confidence: 76%

“…A related macro literature has also documented the concurrent rise in corporate saving in major advanced and emerging economies (e.g. Chen et al 2017, Dao andMaggi, 2018), suggesting that the rise in cash stock has been financed in part by increased retained earnings, in addition to debt and equity issuance.…”

Section: Stylized Factsmentioning

confidence: 99%

“…Although the dataset contains consolidated accounts of mostly publicly listed firms, evidence in Dao and Maggi (2018) Figure 11 describes the extent of tariff liberalization in our sample economies and their trading partners. It is worth noting that import tariff liberalization has been stagnant over the last two decades in our sample countries, mainly because their tariff rates had already reached low levels by the mid 1990's.…”

Section: Datamentioning

confidence: 99%

“…Since the early 1990s, the beginning of the most recent era of globalisation, firms in many industrial countries have been holding increasingly more liquid assets, mostly in the form of cash. 1 This trend has coincided with a rise in corporate saving globally, such that the corporate sector as a whole is increasingly becoming a net lender to the rest of the economy (Chen, Karabarbounis and Neiman, 2017), and indeed there is evidence that the increase in corporate saving has been used consistently to accumulate cash (Dao and Maggi, 2018). At the aggregate level, we observe that non-financial corporate saving plays a crucial role for current account dynamics, contributing the lion share to the level and change in current account surpluses, particularly among advanced economies (Dao and Maggi, 2018;IMF, 2017).…”

Section: Introductionmentioning

confidence: 99%

“…1 This trend has coincided with a rise in corporate saving globally, such that the corporate sector as a whole is increasingly becoming a net lender to the rest of the economy (Chen, Karabarbounis and Neiman, 2017), and indeed there is evidence that the increase in corporate saving has been used consistently to accumulate cash (Dao and Maggi, 2018). At the aggregate level, we observe that non-financial corporate saving plays a crucial role for current account dynamics, contributing the lion share to the level and change in current account surpluses, particularly among advanced economies (Dao and Maggi, 2018;IMF, 2017). Understanding drivers of corporate liquidity demand will therefore not only allow us to better understand the financing decision of firms, but also reveal important insights into drivers of current account dynamics.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Innovation and Corporate Cash Holdings in the Era of Globalization

Adler

Ahn²,

Dao³

2019

IMF Working Papers

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Section: Stylized Factssupporting

confidence: 76%

Section: Stylized Factsmentioning

confidence: 99%

Section: Datamentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Innovation and Corporate Cash Holdings in the Era of Globalization

Adler

Ahn²,

Dao³

2019

IMF Working Papers

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Why the COVID-19 Pandemic Could Increase the Corporate Saving Trend in the Long Run

2021

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Given the global trend in corporate saving over the last decades, the COVID-19 crisis raises doubts about the persistence of companies’ saving behaviour due to the losses which have occurred in many companies caused by the isolation of households and by lockdowns. Before the pandemic, corporate net lending activities had been increasing for decades due to various factors ranging from the rise in uncertainty after the global financial crisis to the increased reliance on internal funding for research and development expenditures. In Germany, the rise in corporate saving was accompanied by an increase in equity capital and a reduction in the corporate sector’s reliance on bank loans. This article argues that the coronavirus crisis is most likely to interrupt the trend in corporate saving in the short run due to the decline in companies’ revenues. Nonetheless, similar to the pattern observed in the aftermath of the financial crisis, it seems reasonable to conjecture that the COVID-19 shock will strengthen corporate saving in the long run as companies may attempt to restore their liquidity and equity capital buffers to better prepare for future shocks. This will in turn create downward pressure on real interest rates and complicate the conduct of monetary policy.

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