The joint determinants of cash holdings and debt maturity: the case for financial constraints

The joint determinants of cash holdings and debt maturity: the case for financial constraints

We examine the joint choices of cash holdings and debt maturity for a large sample of firms for the 1985–2013 period. We find that there is a positive relation between debt maturity and cash holdings. Our results hold after taking into account endogeneity among leverage, debt maturity, and cash hold...

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Veröffentlicht in:Review of quantitative finance and accounting 2017-04, Vol.48 (3), p.597-641
Hauptverfasser: Brick, Ivan E., Liao, Rose C.
Format: Artikel
Sprache:eng
Schlagworte:
Accounting/Auditing
Borrowing
Cash flow
Cash management
Corporate debt
Corporate Finance
Debt management
Default
Econometrics
Economics and Finance
Finance
Financial management
Hypotheses
Investments
Liquidity
Long term debt
Maturity
Operations Research/Decision Theory
Original Research
Short term debt
Studies
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Beschreibung
Zusammenfassung:We examine the joint choices of cash holdings and debt maturity for a large sample of firms for the 1985–2013 period. We find that there is a positive relation between debt maturity and cash holdings. Our results hold after taking into account endogeneity among leverage, debt maturity, and cash holding. We posit that this positive relationship will be found among firms facing financial constraints and we find support for this hypothesis. Our results are robust after we control for agency problems, international taxation, bank loan liquidity covenants and default risk.
ISSN:0924-865X
1573-7179
DOI:10.1007/s11156-016-0567-z