We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Excess Cash and Stock Returns.
- Authors
Simutin, Mikhail
- Abstract
I document a positive relationship between corporate excess cash holdings and future stock returns. The difference in returns of portfolios of high and low excess cash firms amounts to 5% annually or 6% after standard three-factor risk adjustment. Firms with more excess cash have higher market betas and earn lower returns during market downturns. High excess cash companies invest considerably more in the future than do their low cash peers, but do not experience stronger future profitability. On the whole, this evidence is consistent with the notion that excess cash holdings proxy for risky growth options.
- Subjects
INVESTMENTS; BUSINESS enterprises; PROFITABILITY; STOCKS (Finance); FINANCIAL performance; BREAK-even analysis
- Publication
Financial Management (Wiley-Blackwell), 2010, Vol 39, Issue 3, p1197
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/j.1755-053X.2010.01109.x