Corporate Cash Holding in Asia

Date: October 2013
Type: Papers and Briefs
Subject:
Series: Economics Working Papers
ISSN: 1655-5252 (print)
Author: Horioka, Charles Yuji ; Terada-Hagiwara, Akiko

Description

In this paper, the authors analyze the determinants of corporate saving in the form of changes in the stock of cash for 11 Asian economies using firm-level data from the Oriana Database for the 2002–2011 period. They find some evidence that cash flow has a positive impact on the change in the stock of cash, which suggests that Asian firms are borrowing constrained and that they save more when their cash flow increases so that they will be able to finance future investments. Moreover, they find in the developed economy sample that, as expected, cash flow has a positive impact on the change in the stock of cash only in the case of the smallest firms, which are more likely to be borrowing constrained, and find in the developing economy sample that, as expected, the positive impact of cash flow on the change in the stock of cash declines with firm size. In addition, the cash flow sensitivity of cash declined after the global financial crisis. Finally, the authors find some evidence that Tobin’s q has a positive impact on the change in the stock of cash.

Contents

  • Abstract 
  • Introduction
  • Theoretical Considerations
  • Estimation Model and Estimation Methods
  • Data Source
  • Estimate Results 
  • Summary and Conclusions
  • Appendix
  • References