Why do firms hold so much cash? An innovation explanation

Abstract

Theory holds that knowledge has positive economic consequences. While US corporations defend record high level cash holdings citing the precautionary motive in response to changing firm characteristics, I find that knowledge‐based innovation can partially explain these changes. Using distance to the nearest research university as a measure of knowledge intensity, I show that knowledge‐intensive firms hold more cash, even after controlling for firm R&D. Moreover, knowledge‐intensive firms exhibit higher marginal value of cash and save more cash from cash flows than their less knowledge‐intensive counterparts. Overall, the precautionary motive appears to dominate the agency motive, with the effect of knowledge on cash holdings strengthening over time. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.

Kształtowanie elastyczności finansowej przedsiębiorstwa. Perspektywa innowacyjności przemysłowych spółek publicznych

“…Na podstawie dorobku wiedzy na temat zasad lokalizacji działalności wskazuje się, że fi rmy innowacyjne powinny lokować swoją działalność w pobliżu centrów badawczych w celu redukcji kosztów związanych z korzystaniem z zewnętrznych usług badawczych oferowanych przez centra oraz z dostępem do specjalistów o określonych kwalifi kacjach. Stąd w literaturze pojawiają się propozycje mierników innowacyjności związanych z fi zyczną odległością przedsiębiorstwa od uniwersytetów [Lin 2014].…”

Cash Flow Management in the Contemporary Ways of Conducting Business in the Republic of Serbia

“…Th e issue of cash generation side of business was treated from various aspects within the international academic literature: relevance of cash fl ow statement in business plans and analysis [1], cash fl ow statement is the instrument for monitoring company's fi nancial performance [2], dilemmas and discussions related to the cash fl ow statement [3], methods used to prepare cash fl ow statement [4], impact which changes in cash fl ow have on the stock prices of a company [5], risk of refi nancing and its impact on cash item and company's fi nancial policy [6], possibility of predicting cash generation by using rolling forecast [7], infl uence of cash fl ow on the growth of company market share [8], connection between the level of intellectual property owned by the company and its strong cash position [9]. Th e abovementioned papers deal with contemporary issues of cash fl ows and cash fl ow statements within the international framework Authors from our region are increasing their focus on this subject.…”