Abstract
Results from about 17,000 Italian private companies and 152,000 firm-year observations in the 1996-2005 period show that cash holdings in private firms support both the trade-off model and the financing hierarchy theory. In fact, more cash holdings are a feature of riskier companies and firms with higher growth opportunities. At the same time, more cash is held by firms with longer cash conversion cycles and lower financing deficits, as predicted by the pecking order theory. Reported evidence also shows that private firms that pay dividends hold more cash, that cash can be considered as negative debt, and net working capital represents a good cash-substitute. Macroeconomic and industry variables do not play a significant role, though firm’s specific risk draws its relevance from industry risk. Additional evidence shows that cash rich companies tend to invest more in a medium-term future horizon and small firms tend to hold more cash equivalents.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
