Value of Cash during Downturn

Chawarat Piyasil

Abstract


This study investigates the value of cash holdings among Asian firms: Thailand, The Philippines,
Taiwan and Indonesia, which were affected by 1997 Asian financial crisis. Moreover, firms from
Australia and New Zealand are analyzed as a comparison. For 3,717 firms from 6 countries between
1991and 2005, the findings indicate that the 1997 Asian financial crisis has impact on firms in Asian
countries. Firms’ cash holdings do not contribute more to the value of firms during crisis period.
Furthermore, the high level of cash has the same impact on firm value between crisis and non-crisis
period. Although firms do not gain advantage from cash holdings, they do not lead things getting worse.
Indeed, the findings lend support to free cash flow theory.


Keywords


Cash value; Downturn; Crisis

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