The Value of Liquidity - Do Investors Price Corporate Cash Concistently during the Buinsessn Cycle
(2010)Department of Business Administration
- Abstract
- Large, mature firms with lower asset volatility are found to be less influenced by cash ratios during the business cycle while the stock returns of all other firms are highly influenced. A positive relationship is established between the cash-ratio and stock performance, but no specific benefit of cash during downturns can be established for the entire sample. Favoured by cash in downturns are firms with strong growth prospects and firms lacking a controlling blockholder. Firms with strong earnings and low uncertainty abount investment opportunities are more severely penalized for cash holdings during upturns. Firms with a blockholder are not dependent on cash in downturns but suffer in return from a strong discount in upturns. We discuss... (More)
- Large, mature firms with lower asset volatility are found to be less influenced by cash ratios during the business cycle while the stock returns of all other firms are highly influenced. A positive relationship is established between the cash-ratio and stock performance, but no specific benefit of cash during downturns can be established for the entire sample. Favoured by cash in downturns are firms with strong growth prospects and firms lacking a controlling blockholder. Firms with strong earnings and low uncertainty abount investment opportunities are more severely penalized for cash holdings during upturns. Firms with a blockholder are not dependent on cash in downturns but suffer in return from a strong discount in upturns. We discuss different explanations for the observed patterns and see basically three explanatory trajectories, either related to (i) corporate governance and asymmetric information, (ii) the purpose of the held cash, (iii) and the required level of cash for the firm to keep investing (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1625289
- author
- Nitzsche, Anton and Elshult, Kristoffer
- supervisor
- organization
- year
- 2010
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Cash, stock return, business cycle, upturn, downturn, capital structure, corporate governance, agency theory, Nordic market, Management of enterprises, Företagsledning, management
- language
- Swedish
- id
- 1625289
- date added to LUP
- 2010-06-07 00:00:00
- date last changed
- 2012-04-02 18:08:36
@misc{1625289,
abstract = {{Large, mature firms with lower asset volatility are found to be less influenced by cash ratios during the business cycle while the stock returns of all other firms are highly influenced. A positive relationship is established between the cash-ratio and stock performance, but no specific benefit of cash during downturns can be established for the entire sample. Favoured by cash in downturns are firms with strong growth prospects and firms lacking a controlling blockholder. Firms with strong earnings and low uncertainty abount investment opportunities are more severely penalized for cash holdings during upturns. Firms with a blockholder are not dependent on cash in downturns but suffer in return from a strong discount in upturns. We discuss different explanations for the observed patterns and see basically three explanatory trajectories, either related to (i) corporate governance and asymmetric information, (ii) the purpose of the held cash, (iii) and the required level of cash for the firm to keep investing}},
author = {{Nitzsche, Anton and Elshult, Kristoffer}},
language = {{swe}},
note = {{Student Paper}},
title = {{The Value of Liquidity - Do Investors Price Corporate Cash Concistently during the Buinsessn Cycle}},
year = {{2010}},
}