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- Title
Catering and cash savings.
- Authors
Chen, Hsuan‐Chi; Chou, Robin K.; Lu, Chien‐Lin
- Abstract
We examine the catering of managers to investors' preference for cash holdings. We find that cash is positively related to the cash‐holding premium as represented by the difference in the market‐to‐book ratios between cash‐rich and noncash‐rich firms. This positive effect can be attributed to different sources such as internal and external financing, and firms may switch their sources for holding cash when catering to investors' preference. Issuing firms benefit from catering to cash holdings by obtaining higher valuations from the stock market. The catering theory helps explain cash savings especially for firms without a good timing window or financing need.
- Subjects
CASH position of corporations; CATERING services; INVESTORS; VALUATION of corporations
- Publication
European Financial Management, 2024, Vol 30, Issue 3, p1196
- ISSN
1354-7798
- Publication type
Article
- DOI
10.1111/eufm.12438