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Jurnal

Journal of Financial Economics

Keyword

Pengarang

  1. Tor-Erik Bakke
  2. Tiantian Gu

    Subject

    1. ECONOMIC
    2. FINANCIAL

      [Abstrak]

      Why do diversified firms hold significantly less cash than focused
      firms? We study this question using a dynamic model of corporate
      investment, saving, and diversification decisions. We find that
      investment dynamics are more important in explaining the cash
      differences than financing frictions. More efficient internal capital
      markets increase cash differences and are especially valuable when a
      firm diversifies or refocuses. Contrary to static models, more diverse
      conglomerates have lower cash differences. Endogenous selection
      (diversifying firms are larger and have better growth opportunities)
      accounts for 68% of the cash difference, and the diversification event
      itself reduces cash holdings by 32%.

      Periode

      Vol 123, Nomor 3, Tahun 2017

      [Berkas]

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