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  • 8040com金融研究院
8040com Seminar Series (40)
8040com Seminar Series (40)
星期四,2011-05-20 10:30-12:00
Room 403, Datong Building West Huaihai Road 211, SAIF
Michelle Lowry

Cash Holdings in Newly Public Firms


Newly public firms hold substantially higher levels of cash than mature firms, and these substantially‐higher cash holdings remain relatively stable for extended periods after the IPO. While cash has been shown to provide both potential benefits and costs to firms, we find that the benefits outweigh the costs for newly public firms. For example, higher cash holdings significantly increase the probability of survival for newly public firms – but not for mature firms. The market recognizes that high cash balances yield net benefits to IPO firms – one dollar of cash is worth approximately 30% more to IPO firms than to mature firms, and a portfolio of high‐cash IPO firms earns 60 to 80 basis points per month more over a 36‐month period than a portfolio of low‐cash IPO firms. Finally, we find that the dynamics of cash differ significantly for IPO firms with versus without pre‐IPO syndicated loans; firms without such loans have greater uncertainty regarding access to post‐IPO financing, and this uncertainty causes the firms to hold more cash and the market to value this cash more highly.

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