| 作者(Author) | Sue-Fung Wang, Yi-Cheng Shih, and Yu-Yu Liu |
| 篇名(Article title) | Cash Holdings and Corporate Diversification Discount |
| 期刊名(Journal name) | International Research Journal of Applied Finance |
| 國際期刊(International Journal) | Econlit |
| 中文摘要(Abstrct) | |
| ABSTRCT | This paper examines how corporate cash holdings affect the corporate diversification discount. Existing literature claims that diversified firms experience a “diversification discount.” Rajan et al. (2000) argue that a “diversification discount” is due to cross subsidization. Therefore, more cash holdings could induce more cross subsidization. Duchin (2010) claims that diversification allows firms to hold less cash based on the assumption that the reduction in cash holdings is optimal because firms save on the cost of holding cash. The above studies argue that diversified firms with more cash holdings would have reduced firm value. However, Faulkender and Wang (2006) find that the market perceives the presence of market frictions leading to the costly raising of outside capital. The market rewards firms that retain liquidity with higher valuations, which is an act consistent with the ability of such firms to create more value compared with an equivalent firm with less internal cash. In this paper, our empirical results indicate that a higher level of corporate internal liquidity (cash holdings) mitigates the effect of diversification discount on firm value. |
| 中文關鍵字(Keyword) | |
| KEYWORD | Diversification discount; Cash holdings; Corporate liquidity; Cross subsidization |
| 卷期(Volume No) | Vol.V No.3 |
| 頁數(Page number) | PP.310~318 |
| 年份(Year) | 2014/3 |
| 語言(Language) | 2 |