Abstract
We examine whether the high cash ratio and the secular increase in cash holdings of U.S. firms are driven by healthcare and technology industries. We find that these two industries have significantly increased their cash holdings from 1980 to 2015. It is only in these two industries that firms with riskier cash flow, financially constrained firms, R&D firms, low-efficiency firms, and firms with low institutional ownership and high board size dramatically increase their cash holdings. Similar firms in other industries do not substantially accumulate cash reserves. The explanatory powers of firm characteristics, industry characteristics, and industry competition on cash holdings in healthcare and technology industries are stronger than in other industries. Moreover, we find a causal effect of the 2008 financial crisis on the difference in cash holdings between healthcare and technology industries, and other industries.
| Original language | English |
|---|---|
| Pages (from-to) | 286-298 |
| Number of pages | 13 |
| Journal | Journal of Business Research |
| Volume | 118 |
| Early online date | 8 Jul 2020 |
| DOIs | |
| Publication status | Published - Sept 2020 |
Keywords
- Cash holdings
- Industry effect
- Precautionary motive
- Agency costs
- R&D investment
- Industry competition
