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The optimal way to increase cash holdings: From a market perspective - a study of various ways to increase cash holdings and their implications on market value during economic boom and recession

Khadem, Ramin LU and Pettersson, Patrik LU (2013) FEKN90 20131
Department of Business Administration
Abstract
The main purpose of this paper is to identify a relationship between different approaches to accumulate cash and companies’ market values between periods of different economic conditions. Our thesis contributes with information that helps firm managers decide how to increase cash holdings. We come to the conclusion that firms increase their cash holdings by decreasing investments in research and development, reduce capital expenditures and diminish dividend payments. Further, we also come to the conclusion that the market values these cash accumulating approaches differently depending on current economic condition. Cuts in dividends are kindly looked upon by the market throughout the periods, meanwhile cuts in capital expenditures are most... (More)
The main purpose of this paper is to identify a relationship between different approaches to accumulate cash and companies’ market values between periods of different economic conditions. Our thesis contributes with information that helps firm managers decide how to increase cash holdings. We come to the conclusion that firms increase their cash holdings by decreasing investments in research and development, reduce capital expenditures and diminish dividend payments. Further, we also come to the conclusion that the market values these cash accumulating approaches differently depending on current economic condition. Cuts in dividends are kindly looked upon by the market throughout the periods, meanwhile cuts in capital expenditures are most favorable during the crisis and cuts in research and development has the least negative impact on the market value in the post crisis years. (Less)
Please use this url to cite or link to this publication:
author
Khadem, Ramin LU and Pettersson, Patrik LU
supervisor
organization
course
FEKN90 20131
year
type
H1 - Master's Degree (One Year)
subject
keywords
R&D, CAPEX, Dividends, market value, excess cash
language
English
id
3814353
date added to LUP
2013-06-26 10:54:53
date last changed
2013-06-26 10:54:53
@misc{3814353,
  abstract     = {The main purpose of this paper is to identify a relationship between different approaches to accumulate cash and companies’ market values between periods of different economic conditions. Our thesis contributes with information that helps firm managers decide how to increase cash holdings. We come to the conclusion that firms increase their cash holdings by decreasing investments in research and development, reduce capital expenditures and diminish dividend payments. Further, we also come to the conclusion that the market values these cash accumulating approaches differently depending on current economic condition. Cuts in dividends are kindly looked upon by the market throughout the periods, meanwhile cuts in capital expenditures are most favorable during the crisis and cuts in research and development has the least negative impact on the market value in the post crisis years.},
  author       = {Khadem, Ramin and Pettersson, Patrik},
  keyword      = {R&D,CAPEX,Dividends,market value,excess cash},
  language     = {eng},
  note         = {Student Paper},
  title        = {The optimal way to increase cash holdings: From a market perspective - a study of various ways to increase cash holdings and their implications on market value during economic boom and recession},
  year         = {2013},
}