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| Author: | Lins, K.V. Servaes, H. Tufano, P. |
| Title: | What drives corporate liquidity? An international survey of cash holdings and lines of credit |
| Journal: | Journal of Financial Economics
2010 : OCT, VOL. 98:1, p. 160-176 |
| Index terms: | corporate liquidity credit cash management financial management chief executive officers international surveys |
| Language: | eng |
| Abstract: | This paper surveys chief financial officers (CFOs) from 29 countries to examine whether and why firms use lines of credit (henceforth as: l-of-cr.) versus non-operational (herein as: non-opr.) cash (or excess cash) for their corporate liquidity. These two liquidity sources are found to be employed to hedge against different risks. Non-opr. cash protects against future cash flow shocks in bad times, whereas l-of-cr. give firms the option to use future business opportunities available in good times. L-of-cr. are the main source of liquidity for companies around the world, including about 15 percent of assets, while less than half of the cash held by companies is held for non-opr. purposes, comprising about 2 percent of assets. Across countries, firms make greater use of l-of-cr. when external credit markets are poorly developed. |
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