I have received anecdotal evidence (heard stories) about many firms hoarding cash (liquid assets) post 2008 and not spending it despite availability of many projects with positive NPV. However, when I tried to find some research / data on this matter, I couldn't dig out too much.

I know that one can use compustat to get a grasp on liquid assets that firms have. Is there any other data on this matter? What papers would be starting points to read up on the related literature?


2 Answers 2


I know very little about this, but check out Jake Zhao's work. He's an AP at Stony Brook.

From the abstract,

My model finds that 63% of the increase in corporate cash holdings can be accounted for by the increase in cash flow volatility. The increase in cash flow volatility observed in the data arises from a decrease in the correlation between revenue and operating expenses.

Accounting for the Corporate Cash Increase.

I imagine the references he includes will also be useful.

Edit: He uses compustat data.


Since I'm a macro rather than a corporate finance guy, my go-to resource for getting a rough sense of aggregate magnitudes is the flow of funds accounts. Take a look at the B.102 balance sheet for nonfinancial corporate business, and also the F.102 flows for nonfinancial corporate business.

The relevant insights I draw from this data are:

  1. In aggregate level terms, "cash" is a pretty small part of corporate balance sheets, and the extent to which there is any strong upward trend is debatable. Defining cash to be bank deposits plus MMMF shares plus commercial paper/Treasuries/Agencies, cash as a share of total assets was 4.7% in 2013, 4.3% in 2008, 4.9% in 2003, 4.1% in 1998, 4.4% in 1993, and so on.

    Now, "total assets" is questionable as a denominator, since it includes large entries for FDI, real estate, and "miscellaneous" assets; if you exclude these and adopt a narrower denominator (or subtract some liabilities to get a net measure), you tend to get the long-term upward trend that many studies have identified. But there still isn't a strong recent increase, and the numbers are small enough that this hardly seems like an important aspect of corporate behavior.

  2. In aggregate flow terms, cash is also not a very important part of corporate balance sheets. The following table, adapted from the F.102 flow of funds data, shows net acquisition of cash ("cash") vs. gross capital expenditures ("capex"), total internal funds ("funds"), net equity issuance ("equity"), and net funds raised through credit markets ("credit"), all in billions. As you can see, "cash" really pales in comparison to these other flows:

    year |  cash  |  capex  |  funds  |  equity  |  credit  |
    2010 |   +14  |  +1235  |  +1677  |    -255  |     -71  |
    2011 |    -5  |  +1332  |  +1729  |    -457  |    +251  |
    2012 |   +29  |  +1478  |  +1761  |    -360  |    +404  |
    2013 |  +138  |  +1526  |  +1805  |    -373  |    +427  |

    Net annual changes in cash are tiny compared to capital expenditures - and to internal funds available, stock buybacks less sales, and even net debt issuance.

I don't mean to dismiss corporate cash management as a topic altogether - I'm sure that it can be an important topic for corporate finance guys. But given these relative magnitudes, I do think that aggregate cash accumulation is a pretty minor macroeconomic issue right now, and that its high profile in the media (with a lot of discussion about "idle" cash, etc.) is misplaced.

(Random aside: corporate cash holdings are apparently quite concentrated, with a great deal held by tech companies; this article claims that Apple alone accounts for almost 10%. In my view this is another clue that aggregate cash probably isn't that important a macroeconomic datapoint.)


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