Nguyen, T, Cai, CX and McColgan, P (2017) How firms manage their cash flows: an examination of diversification’s effect. Review of Quantitative Finance and Accounting, 48 (3). pp. 701-724. ISSN 0924-865X
Abstract
We extend recently documented evidence that diversified firms hold significantly less cash than specialized firms to consider differences in how diversified and specialized firms adjust their cash flows to achieve their target cash balance. We find that diversified firms have higher free cash flows as a result of equal operating cash flows and lower investment in comparison to specialized firms. Diversified firms save less cash by placing less reliance on external financing; by issuing less debt and equity, and distributing higher cash dividends. Our findings support the hypothesis that diversified firms are able to hold less precautionary cash as they are in better position to finance investment opportunities internally from operating cash flows.
Metadata
Item Type: | Article |
---|---|
Authors/Creators: |
|
Copyright, Publisher and Additional Information: | © Springer Science+Business Media New York 2016. This is an author produced version of a paper published in Review of Quantitative Finance and Accounting. Uploaded in accordance with the publisher's self-archiving policy. The final publication is available at Springer via https://doi.org/10.1007/s11156-016-0565-1 |
Keywords: | diversification; liquidity; free cash flow; financing cash flow; financial management. |
Dates: |
|
Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 03 Dec 2015 10:54 |
Last Modified: | 19 Apr 2017 13:06 |
Published Version: | https://doi.org/10.1007/s11156-016-0565-1 |
Status: | Published |
Publisher: | Springer Verlag |
Identification Number: | 10.1007/s11156-016-0565-1 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:92424 |