Many commentators and policymakers observed that this so called dead money might be one reason behind the sluggish performance of the United States and other developed economies since the Great Recession. But evidence on such cash hoarding behavior is limited to listed or public firms which account for a relatively small part of the US economy.
Do private firms also hold large cash balances Using a rich panel of over non SEC filing private US firms the author finds that the average public firm holds twice as much cash as the average large private firm over the period. Results are most consistent with the hypothesis that differences in the extent to which public and private firms engage in market timing Chinese Overseas America Number Data are a key driver of public firms higher demand for cash as the risk of misvaluation induces public firms to raise capital and accumulate precautionary cash reserves when they perceive their equity to be overvalued. Consistent with this hypothesis the author finds that the cash difference between public and private firms is larger in industries with a higher prevalence of misvaluation shocks.
In addition public firms in these industries tend to save a larger fraction of their equity issuance proceeds than private firms particularly in times when they have reasons to believe that their equity is overvalued. are a large and underexplored part of the US economy. This paper underscores the limitations of extrapolating what we know about public firms to private firms. The much debated cash hoarding behavior of public firms has not been followed by their private counterparts. Public firms greater access to capital explains about one quarter of the cash difference between public and private firms. The remainder can be explained by differences in the extent to which public and private firms engage in market timing in response to misvaluation shocks.
發表於 2024-3-12 15:07:02
