Cash holding dynamics and competition intensity: Evidence from UK firms

Gbenga, Adamolekun, Jones, Edward and Li, Hao 2023. Cash holding dynamics and competition intensity: Evidence from UK firms. Managerial and Decision Economics 44 (1) , pp. 641-662. 10.1002/mde.3705

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Abstract

Using a quasi-natural experiment and various measures of competition intensity, we examine whether an increase in product market competition is a key driver of firm cash holdings. We find that firms increase cash holdings when competition is intense. The results suggest that the degree of increase in cash holdings is magnified among firms exposed to high predatory threat and financing friction. In addition, we examine if increasing cash holdings offers a competitive advantage in the product market. Our results indicate that firms with large cash reserves make gains in market share at the expense of their rivals. Gains in the product market are more pronounced among firms with low exposure to predatory risk and financing frictions.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HG Finance
Publisher:	Wiley
ISSN:	0143-6570
Date of First Compliant Deposit:	18 August 2022
Date of Acceptance:	16 August 2022
Last Modified:	10 May 2023 05:47
URI:	https://orca.cardiff.ac.uk/id/eprint/152025

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