What drives corporate liquidity? An international survey of cash holdings and lines of credit

Lins, Karl V., Servaes, Henri and Tufano, Peter (2010) What drives corporate liquidity? An international survey of cash holdings and lines of credit. Journal of Financial Economics, 98 (1). pp. 160-176.

Abstract

We survey chief financial officers from 29 countries to examine whether and why firms use lines of credit versus non-operational (excess) cash for their corporate liquidity. We find that these two liquidity sources are employed to hedge against different risks. Non-operational cash guards against future cash flow shocks in bad times, while credit lines give firms the option to exploit future business opportunities available in good times. Lines of credit are the dominant source of liquidity for companies around the world, comprising about 15% of assets, while less than half of the cash held by companies is held for non-operational purposes, comprising about 2% of assets. Across countries, firms make greater use of lines of credit when external credit markets are poorly developed.

Item Type: Article
Keywords: risk management
Subject(s): Finance
Centre: Faculty of Finance
Date Deposited: 29 Aug 2012 15:44
Last Modified: 23 Oct 2015 14:07
URI: http://eureka.sbs.ox.ac.uk/id/eprint/4140

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