Abstract-The topic of corporate cash holdings has gained a lot of attention in academia recently. The current paper investigates the valuation of cash holdings under distributed profit-based corporate taxation. We show that the cash-to-assets ratio has increased considerably since the introduction of distributed profit-based taxation in Estonia. Almost 1/3 of all the companies in Estonia had cash-to-assets ratios above 50% in 2011. We argue that in order to value such cash holdings, a discount at a size of tax burden associated with profit distribution should be used both in case of cash as well as cash equivalents.

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