• Media type: E-Book
  • Title: The Financial Assets of Non-Financial Firms
  • Contributor: Darmouni, Olivier [Author]; Mota, Lira [Other]
  • Published: [S.l.]: SSRN, [2020]
  • Extent: 1 Online-Ressource (52 p)
  • Language: English
  • DOI: 10.2139/ssrn.3543802
  • Identifier:
  • Keywords: Superstar firms ; corporate cash ; corporate bonds ; repatriation tax ; liquidity management
  • Origination:
  • Footnote: Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 25, 2020 erstellt
  • Description: This paper provides new evidence on how the largest nonfinancial firms actively manage the composition of their financial assets. We construct a novel hand-collected panel dataset to document their financial portfolio dynamics. Over the past decade, bond portfolios have grown to be at least as large as cash-like instruments. In particular, we show a meteoric rise of corporate bond holdings, which have outgrown sovereign bond holdings to reach 25% of total corporate financial assets by 2017. Moreover, we conduct two event studies to shed light on the drivers of this growth. We first observe a drastic reversal after the 2017 tax reform, when firms liquidated bond portfolios to fund large share repurchases, whereas cash-like instruments remained stable. Second, the liquidity crisis of early 2020 triggered a spike in cash-like instruments, but not in riskier assets such as corporate bonds. Our evidence suggests large firms often actively manage their financial portfolios in a way that reflects tax incentives and reach for yield as opposed to financial constraints
  • Access State: Open Access