ESKANDARI, RUHOLLAH orcid.org/0000-0002-3976-7132 and Zamanian, Morteza (2022) Cost of carry, financial constraints, and dynamics of corporate cash holdings. Journal of corporate finance. 102216. ISSN 1872-6313
Abstract
This paper provides new evidence on how the cost of carry is linked to corporate cash policy in the presence of financial frictions. Using both time-series and firm-level data for US public and private manufacturing firms, we find a negative correlation between cash holdings and the cost of carry for financially unconstrained firms. We find no evidence of such a relation for financially constrained firms. Our results suggest that financial constraints play an important role in adjusting cash to changes in the cost of carry. We introduce a simple model in which firms differ in their cost function of external finance, where the constrained firms’ highly curved cost function drives a steeper cash demand, leading to their lower cash sensitivity to the cost of carry.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2022 The Authors. |
Keywords: | Cost of holding cash,Financial constraints,Corporate cash holdings,Financially constrained versus unconstrained firms |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) |
Depositing User: | Pure (York) |
Date Deposited: | 14 Jun 2023 11:10 |
Last Modified: | 16 Oct 2024 19:15 |
Published Version: | https://doi.org/10.1016/j.jcorpfin.2022.102216 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.1016/j.jcorpfin.2022.102216 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:200451 |
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Description: Cost of carry, financial constraints, and dynamics of corporate cash holdings
Licence: CC-BY 2.5