Arbeitspapier

Internal sources of finance and the great recession

The rising stockpile of cash as a share of total assets at U.S. firms has intrigued economists since at least the paper of Bates, Kahle, and Stulz (2006), yet there has been relatively little work on where this cash has come from and how it is related to investment performance. We exploit Statement of Cash Flows data from Compustat to decompose firms' cash stocks and show that the rise in cash holdings has coincided with an increased willingness to save internally generated cash. We show that although investment is normally sensitive to externally generated cash, the increased sensitivity of investment to cash during the Great Recession is driven by cash from internal sources. Smaller firms were also more affected by the recent downturn than larger firms. Our results agree with the findings of Almeida, Campello, and Weisbach (2004) on cash hoarding and financial constraints, as well as the estimates in Duchin, Ozbas, and Sensoy (2010) on the important role of saved cash during the financial crisis.

Language
Englisch

Bibliographic citation
Series: Working Papers ; No. 10-15

Classification
Wirtschaft
Financial Crises
Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Subject
corporate investment
corporate liquidity
cash
financial constraints
Great Recession
Kapitalstruktur
Betriebliche Liquidität
Betriebliche Investitionspolitik
Finanzmarktkrise
USA

Event
Geistige Schöpfung
(who)
Barnes, Michelle L.
Pancost, N. Aaron
Event
Veröffentlichung
(who)
Federal Reserve Bank of Boston
(where)
Boston, MA
(when)
2010

Handle
Last update
10.03.2025, 11:45 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Barnes, Michelle L.
  • Pancost, N. Aaron
  • Federal Reserve Bank of Boston

Time of origin

  • 2010

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