Working Paper: Corporate Investment and Cash Holdings under Financing Shocks

Working Paper - October 2021 - No. 182

Authors Cucic, Dominic
Subject Refinancing risk; Risk management
Type Working paper
Year 2021
Published 27 October 2021
Abstract icon I analyze to which extent corporate cash holdings protect firms from the adverse consequences of shocks to their borrowing costs. Despite firms self-insuring against spikes in their borrowing costs by holding cash, an aggregate shock to borrowing conditions similar to that seen during the Global Financial Crisis can significantly contract aggregate investment, especially for firms with low cash holdings.