Abstract
The paper explores factors that lead to accumulation or decumulation of firms' cash reserves. In particular, the paper empirically examines whether additional future fixed capital and R&D investment expenditures induce firms to change their liquidity ratio while considering the role of market imperfections. Implementing a dynamic framework on a panel of US, UK, and German firms, it is found that firms in all three countries make larger adjustments to cash holdings when they plan additional future R&D rather than fixed capital investment expenditures. This behavior is particularly prevalent among financially constrained firms.
| Original language | English |
|---|---|
| Pages (from-to) | 459-474 |
| Journal | Review of International Economics |
| Volume | 21 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 2013 |
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