Journal of Corporate Finance Vol. 67 2021
Do CEO beliefs affect corporate cash holdings?
Abstract
We develop a model of corporate cash holdings that incorporates CEO beliefs. An optimistic CEO views external financing as excessively costly but expects this cost to moderate over time. The optimistic CEO thus delays external financing while funding current investments with existing cash and maintaining a lower cash balance than rational CEOs. We find that, relative to rational CEOs, optimistic CEOs hold 24% less cash, hold lower cash to fund the firms' growth opportunities, and save less cash out of incremental cash flow.
- DOI
- 10.1016/j.jcorpfin.2021.101886
- Volume
- 67
- Pages
- 101886
- Language
- en
- Sources
- crossref openalex bibtex:phds-export.bib