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Cash Is Not King: Evidence from the Commercial Paper Market

Author

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  • Vuillemey, Guillaume
  • Klinger, Sven
  • Syrstad, Olav

Abstract

Using new transaction-level data for non-financial commercial paper (CP) in the U.S., we show that companies systematically reduce their outstanding short-term debt on quarterly and annual disclosure dates. Constraints on CP lending supply cannot explain this pattern. Instead, firms prefer repaying short-term debt over disclosing high cash holdings to signal that their cash is readily available and not trapped in foreign subsidiaries. Consistent with this interpretation, we show that firms with higher cash holdings, more sales in regions with tight capital controls, or with higher debt-equity ratios compared to industry peers reduce their short-term debt more aggressively at disclosure dates.

Suggested Citation

  • Vuillemey, Guillaume & Klinger, Sven & Syrstad, Olav, 2021. "Cash Is Not King: Evidence from the Commercial Paper Market," CEPR Discussion Papers 16043, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16043
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    More about this item

    Keywords

    Cash; Commercial paper; Adverse selection; Disclosure; Window dressing;
    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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