We investigate whether the relation between financial constraints and the value of corporate cash holdings varies across firms with different engagement in research and development activity. Section 2 describes the data and confirms prior evidence on the value of cash holdings for constrained and unconstrained firms.
Table 2 From Financial Constraints Investment And The
financial constraints investment and the value of cash holdings
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Financial constraints investment and the value of cash holdings. Pinkowitz and williamson 2004 who study the value of cash holdings. Sections 3 and 4 examine the effect of cash holdings on investment and the association between investment and value respectively. We find that the value of cash holdings is higher in firms with higher ceo risk incentives.
Consistent with cash holdings alleviating financial constraints faulkender and wang 2006 find that the relation between excess returns and changes in cash holdings is stronger for firms that are more likely to be financially constrained. As such the evidence is consistent with the hypothesis that greater cash holdings of constrained firms are a value increasing response to costly external financing. Within their study entitled financial constraints investment and cash holdings value denis and sibilkov 2010 found that more cash holdings are related to higher levels of investment in.
Existing studies document that cash holdings are more valuable for financially constrained firms than for financially unconstrained firms. These findings suggest that higher cash holdings allow constrained firms to undertake value increasing projects that might otherwise be bypassed. Financial constraints investment and the value of cash holdings to increase investment and ii the marginal investment of constrained rms is more strongly related to value than that of unconstrained rms.
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Pdf Financial Constraints Investment And The Value Of
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