Determinants of Corporate Cash Policy: A Comparison of Private and Public firms

摘要

In this paper, we provide one of the first large sample comparisons of cash policies in public and private US firms. We first show that on average private firms hold less than half as much cash as public firms do. These higher cash holdings are partially caused by the fact that public firms add more to their cash reserves in a given year, even controlling for a host of spending and savings factors, than do similar private firms. At the same time, however, we find that among firms with excess cash holdings, public firms spend more of it than do private firms. Thus, public firm managers are more aggressive in both accumulating and spending cash reserves. Finally, consistent with the presence of financing frictions, we find that private firms’ cash-to-cash flow sensitivity is higher than that of public firms. Overall, our evidence supports both the agency conflicts and the financing frictions views of corporate cash policy.