This paper examines how credit risk spillovers affect corporate financial flexibility. We construct separate empirical proxies to disentangle the two channels of spillovers—credit contagion (CRC), where one firm's default increases distress likelihood another; and product market rivalry (PMR), same strengthens position a competitor. show that firms facing greater CRC have weaker subsequent oper...

The gradual replacement of traditional U.S. public companies by more R&D-intensive firms is key to understanding the secular trend in average cash-holdings. Over the last 35 years, an increasing share of R&D—intensive firms has entered the stock market with progressively higher cash-balances. This positive entry-effect dominates the negative within-firm effect post IPO. We build a firm industry...

Bank liquidity management has become a major issue during the financial crisis as liquidity shortages have intensified and have put pressure on banks to diversity and improve their liquidity sources. While a significant strand of the literature concentrates on wholesale liquidity generation and on the alternative to deposit funding, the management of an inventory of cash holdings within the ban...

This study examines the effect of technology spillovers on firms’ cash holdings. It finds that firms facing greater technology spillovers hold higher cash balances. This effect is more pronounced among financially constrained firms and for firms that are likely to benefit more from diffused technology, e.g., those have newer patents, are more profitable, face better growth opportunities and are...

I document a positive relationship between excess cash holdings of actively managed equity mutual funds and future fund performance. The difference in returns of portfolios of high and of low excess cash funds amounts to over 2% annually, or approximately 3% after standard risk adjustment. I study whether this difference in performance can be explained by the differences in managerial stock sel...

In this paper we provide evidence on how firm-specific and macroeconomic uncertainty affects shareholders’ valuation of a firm’s cash holdings. This extends previous work on this issue by highlighting the importance of the source of uncertainty. Our findings indicate that increases in firm-specific risk generally increase the value of cash while increases in macroeconomic risk generally decreas...

We investigate a firm’s joint decision to hold cash and to hedge in the presence of financial constraints. The predictions are tested using a sample of manufacturing firms. We confirm the existing evidence of a positive sensitivity of cash holdings to cash flow for financially constrained firms. More importantly, we find a positive sensitivity of hedging to cash flow for constrained firms and, ...