4-4 (A54)
Peer Effects on Corporate Cash Holdings
Yi-Wen Chen
National Chengchi University, Taiwan
Yuanchen Chang
National Chengchi University,
Taiwan
This paper examines peer effects on corporate cash holdings in the U.S.
market. We investigate whether, how and
why, managers take into account rival’s cash levels when considering their own
cash holdings. We show that the ratio of cash to total assets is significantly
influenced by peer firms’ average cash holdings. We also find that firms that
are financially constrained and
have higher R&D expenditures tend to mimic cash holdings of their rivals. We
conclude that peer effect is an important determinant of corporate cash policy
for U.S. firms.