Why Do Firms Hold So Much Cash? A Tax-Based Explanation

By C. Fritz Foley, Jay C. Hartzell, Sheridan Titman, Garry J. Twite. 2007

937 citations recorded by the source corpus.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b32cc56bff70a6776bdc14a1ababcc8e3db9df59

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Citations in the corpus

Determinants of corporate cash holdings: evidence from the emerging market of Turkey (2014, background): “To the knowledge of authors, multinationality has not been investigated at all in prior studies except for two studies (Foley et al., 2007; Ramírez and Tadesse, 2009) which proved the positive impact of multinationality on cash holdings.”
A Comparison of the Tax-Motivated Income Shifting of Multinationals in Territorial and Worldwide Countries (2016, positive): “31 Foley et al. (2007) include the ratio of research and development expense to total assets as an independent variable.”
Corporate cash holdings: Causes and consequences (2015, neutral): “5 Foley et al. (2007) provide a different explanation for US firms’ large cash holdings, attributing high levels to large amounts of cash held by their foreign subsidiaries due to tax costs of repatriating foreign income.”
Economic Policy Uncertainty And Corporate Cash Holdings (2017, neutral): “tax (Foley et al., 2007; Harford et al., 2017), and information asymmetry (Harris & Raviv,”
Corporate social responsibility and corporate cash holdings (2016, background): “…and Partch, 2003; Pinkowitz et al., 2006; Dittmar and Mahrt-Smith, 2007; Harford et al., 2008), the financial constraint motive (Almeida et al., 2004; Han and Qiu, 2007; Denis and Sibilkov, 2010), the tax motive (Foley et al., 2007), and the diversification motive (Duchin, 2010; Tong, 2011).”
Corporate Liquidity Management: A Conceptual Framework and Survey (2014, neutral): “In particular, Foley et al. (2007) find that firms facing higher repatriation taxes have higher cash holdings and tend to hold this cash abroad, in affiliates that would trigger high tax costs when repatriating earnings.”
Shaped by Booms and Busts: How the Economy Impacts CEO Careers and Management Styles (2017, neutral): “However, the tax-based explanation of cash holdings suggests that firms hold cash in their foreign subsidiaries because of the tax costs associated with repatriating foreign income (Foley et al. 2007).”
Product Market Threats, Payouts, and Financial Flexibility (2012, background): “of zero or foreign income times a firm’s marginal effective tax rate computed as in Graham (1996) minus foreign taxes paid as in Foley et al. (2007). The industry acquisition intensity is the total number of acquisitions divided by the number of firms in a given industry.”
Real Effects of Accounting Rules: Evidence from Multinational Firms’ Investment Location and Profit Repatriation Decisions (2010, positive): “Following Foley et al. (2007) Domestic income and Foreign income are scaled by total assets.”
Precautionary Savings with Risky Assets: When Cash Is Not Cash (2016, neutral): “Furthermore, the finding that firms with more foreign income hold more risky assets is consistent with cash “trapped” abroad for repatriation tax reasons (Foley et al. (2007)) being invested in risky securities.”