A transaction cost perspective on why, how, and when cash impacts firm performance
✍ Scribed by Jonathan P. O'Brien; Timothy B. Folta
- Publisher
- John Wiley and Sons
- Year
- 2009
- Tongue
- English
- Weight
- 164 KB
- Volume
- 30
- Category
- Article
- ISSN
- 0143-6570
- DOI
- 10.1002/mde.1457
No coin nor oath required. For personal study only.
✦ Synopsis
Abstract
While both financial and behavioral theories suggest that cash holdings may be beneficial to R&D‐intensive firms, agency theory would suggest that strong monitoring may be needed to ensure that cash holdings are not squandered. We contend that transaction cost economics provides a valuable lens for understanding the performance implications of cash holdings because not only does it explicate the benefits and costs of cash holdings in a single unified theoretical framework, but it further clarifies how environmental uncertainty critically moderates these relationships. Empirical tests on a large sample of US corporations yield strong support for our theory. Copyright © 2009 John Wiley & Sons, Ltd.