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Bank dependence and corporate propensity to save

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  • Nakajima, Kan
  • Sasaki, Takafumi

Abstract

Recently, Japanese firms resumed accumulation of cash to the highest cash-holding levels among developed economies. We investigate the cash-saving behavior of these firms over the period 2002–2011, focusing on the firm–bank relationship. We find that the determinants of cash-saving policy are substantially different between bank-dependent firms and firms with access to the bond markets. We document that firm size and research and development intensity significantly determine the cash balances and cash-flow sensitivities of cash for firms that have access to the bond markets; however, this is not the case for bank-dependent firms. Furthermore, the effects of these variables become larger after the 2008 financial crisis only for firms with access to the bond markets. These results suggest that bank-dependent firms do not determine their cash-saving policies based on precautionary demands for cash.

Suggested Citation

  • Nakajima, Kan & Sasaki, Takafumi, 2016. "Bank dependence and corporate propensity to save," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 150-165.
    • Handle: RePEc:eee:pacfin:v:36:y:2016:i:c:p:150-165
    DOI: 10.1016/j.pacfin.2015.12.012
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    Cited by:

    1. Kan Nakajima & Takafumi Sasaki, 2022. "Business group affiliation, corporate diversification, and cash holdings," Asia Pacific Journal of Management, Springer, vol. 39(1), pages 173-199, March.
    2. Sasaki, Takafumi, 2016. "Financial cash flows and research and development investment," Pacific-Basin Finance Journal, Elsevier, vol. 39(C), pages 1-15.
    3. Cui, Weihan & Cuong, Ly Kim & Shimizu, Katsutoshi, 2020. "Cash policy and the bank-firm relationship," Economic Modelling, Elsevier, vol. 91(C), pages 804-818.
    4. Chauhan, Yogesh & Pathak, Rajesh & Kumar, Satish, 2018. "Do bank-appointed directors affect corporate cash holding?," International Review of Economics & Finance, Elsevier, vol. 53(C), pages 39-56.
    5. Shikimi, Masayo, 2019. "Bank relationships and corporate cash holdings," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    6. Ryosuke Fujitani & Masazumi Hattori & Tomohide Mineyama, 2024. "Passive and Proactive Motivations of Cash Holdings," Working Papers e200, Tokyo Center for Economic Research.
    7. Sasaki, Toshinori & Suzuki, Katsushi, 2019. "Bank health and cash holdings: Evidence from a bank-centered financial market," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).

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    More about this item

    Keywords

    Bank power; Cash-flow sensitivity of cash; Cash holding; R&D;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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