نقدینگی سهام و دارایی های نقدی شرکت ها Stock Liquidity and Corporate Cash Holdings

I. Introduction Previous studies show that firms hold cash for several reasons, such as transaction motives, precautionary motives and agency motives (Opler et al., 1999; Bates et al., 2009). In static trade off theory, corporate cash holdings are determined by the marginal cost of liquidity assets shortage and the opportunity cost of holding liquidity assets. In agency theory, entrenched managers prefer to hold excess cash. Since cash allows managers to make investment without the monitoring and punishment from the capital market. In this paper, we argue that stock liquidity has a negative effect on corporate cash holdings. First, stock liquidity reduces the cost of equity issuing and debt financing (Butler et al., 2005; Huang et al., 2015), lowering the cost of liquidity assets shortage. Second, stock liquidity can enhance corporate governance through both increasing blockholder intervention and amplifying threat of exit (Edmans et al., 2013), making managers less entrenched. Hence, according to static trade off theory and agency theory, firms with liquid stocks will hold less cash. Our study has two main contributions. First, to our knowledge, this study is the first attempt to investigate the impact of stock liquidity on corporate cash holdings. Second, we use decimalization as a quasi-natural experiment to effectively mitigate endogenous concerns in our tests. II. Data and Variables We obtain our data from two data sources. Accounting variables are from COMPUSTAT and intra-day stock data is from TAQ. The sample period is from 1993 to 2013 and we exclude financial firms and utility firms. Following Opler et al. (1999), we measure cash holdings as the ratio of cash and short-term investments to net assets. We use the negative natural logarithm of the annual dollar effective spread as our liquidity measure. The annual dollar effective spread is calculated as the equallyweighted average of the daily dollar effective spread over a fiscal year for a stock. The daily dollar effective spread is defined as the simple average of the dollar effective spreads for each matched quote/trade1 over a trading day for each stock in our sample. Our control variables include firm size, market-to-book ratio, cash flow, net working capital, capital expenditures, leverage, industry cash flow volatility, dividend dummy, R&D and acquisitions expenditures, all of which have been shown having effects on corporate cash holdings in literature. Additionally, we control the close price at the end of the fiscal year to remove the influence of price level on the dollar effective spread. We also include year dummy variables and 2-digit SIC industry dummy variables to control year fixed effects and industry fixed effects in our regression tests. Table 1 gives the detailed descriptions for these variables. Summary statistics for variables are listed in Table 2. The average (median) cash holding is equal to approximately 31.2% (6.8%) of net assets.