Why do firms save cash from cash flows: Evidence from firm-level estimation of cash-cash flow sensitivities using Bayesian estimation

摘要

We construct firm-level estimates for the cash flow sensitivity of cash (CCFS) by modeling heterogeneous slopes in a reduced-form cash equation augmented with cash flow. This approach enables us to identify firms that display a high propensity to save cash from cash flows versus firms that display a low or even negative saving propensity. Then we analyze which firm characteristics are associated with the magnitude of CCFS. We find that high CCFS-firms have higher variation and lower serial correlation in income suggesting that higher income shocks trigger buffering of cash. However, high CCFS-firms do not appear to suffer more from financing frictions measured by their debt-capacity, external finance dependence, interest payments or traditional indicators such as profitability-rates, liquidity-rates and dividend-policy. Overall, the results suggest that changes in cash are used for smoothing of uncertain income fluctuations but do not indicate a higher exposure to financing constraints.