Asset Tangibility, Cash Holdings, and Financial Development

52 Pages Posted: 5 Nov 2016 Last revised: 18 Apr 2018

See all articles by Jin Lei

Jin Lei

Brock University - Goodman School of Business

Jiaping Qiu

McMaster University - Michael G. DeGroote School of Business

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance

Date Written: June 1, 2017

Abstract

Rising intangible assets on corporate balance sheets around the world could limit borrowing capacity and consequently hinder growth if firms must preserve cash and forgo investment opportunities. We show that financial development lowers the sensitivity of cash holdings to tangible assets and promotes firm growth. The attenuating effect of financial development on cash-tangibility sensitivity is stronger for younger, smaller, and R&D intensive firms. We also find that sectors with a smaller proportion of tangible assets grow faster in countries with more developed financial markets. Our analysis reveals an important asset tangibility channel through which financial development facilitates firm growth.

Keywords: Asset tangibility; cash holdings; investments; financial development; economic growth

JEL Classification: G21, G32, O43

Suggested Citation

Lei, Jin and Qiu, Jiaping and Wan, Chi, Asset Tangibility, Cash Holdings, and Financial Development (June 1, 2017). Available at SSRN: https://ssrn.com/abstract=2864500 or http://dx.doi.org/10.2139/ssrn.2864500

Jin Lei

Brock University - Goodman School of Business ( email )

500 Glenridge Avenue
St. Catharines, Ontario L2S3A1
Canada

Jiaping Qiu (Contact Author)

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

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