Why would companies hold cash in their bank accounts, when cash itself does not produce any further value like an investment in a machine does? The academic literature finds different concepts for the reasons of corporate cash holdings. While Keynes (1936) proposes a transaction- and precautionary-motive to hold cash, Jensen (1986) states that managers have a vested interest to accumulate cash, because it exempts them from capital market disciplining. However, country-specific factors and reforms in Japan might also induce the companies to save up liquid assets.
The aim of this paper is to study the development, determinants and valuation of Japanese corporate cash holdings in the period from 1988 to 2021, based on the approach of Bates et al. (2009). Furthermore, I want to study how the roles of theoretical cash holding motives and corporate governance (reforms) in Japan are reflected in the three objects of research from above. Since the variables only proxy the theoretical motives, the object of this paper is not to create clear boundaries but to give an insight in the possible forms of their appearing.
Therefore the next chapter gives a comprehensive overview about the academic literature regarding the theoretical background for corporate cash holdings and the current state of research of the interaction between corporate governance and cash holdings in Japan. The motives and findings from this section are revisited when explaining the results of the empirical part in this paper. The empirical part is divided in three main parts. The first part discusses the development of corporate cash holdings in general and for different kinds of companies. In the subsequent part, I put a focus on the factors that determine the cash holdings and how they serve as proxies for the theoretical motives, as discussed before. The last part shows how investors in Japan value cash holdings in general. Chapter 5 summarizes the findings.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Review of the literature
- Theoretical background for the holding of liquidity
- Japanese corporate governance situation and its impact on cash holdings
- Sample and description
- Development of the Japanese corporate cash and leverage holdings
- Types of companies that hold more cash
- Determinants for the corporate cash holdings
- Regression estimates
- Regression results for the value of cash holdings
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This term paper examines the determinants of corporate cash holdings in Japan, focusing on the unique aspects of Japanese corporate governance and its influence on liquidity management. The analysis seeks to understand the factors that drive Japanese firms' decisions to hold cash, taking into account the specific characteristics of the Japanese market.
- Corporate cash holdings in Japan
- Japanese corporate governance and its impact on liquidity
- Determinants of cash holdings
- Regression analysis and empirical findings
- Implications for corporate finance and investment decisions
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: Provides an overview of the research topic and outlines the paper's objectives. It highlights the importance of understanding corporate cash holdings, particularly in the context of Japanese corporate governance.
- Review of the literature: Presents a comprehensive review of relevant literature on the theoretical background for holding liquidity and the specific characteristics of Japanese corporate governance. It discusses the existing theories and empirical studies related to corporate cash holdings.
- Sample and description: Introduces the data and sample used in the analysis, describing the development of Japanese corporate cash and leverage holdings over time. It also examines the types of companies that tend to hold more cash.
- Determinants for the corporate cash holdings: Presents the empirical analysis, exploring the factors that influence corporate cash holdings in Japan. It includes regression estimates and results, analyzing the impact of various variables on the value of cash holdings.
Schlüsselwörter (Keywords)
This term paper focuses on corporate cash holdings, Japanese corporate governance, liquidity management, regression analysis, determinants of cash holdings, empirical finance, and the Japanese market.
- Quote paper
- Maximilian Gennrich (Author), 2022, The development, determinants and valuation of cash holdings of Japanese companies, Munich, GRIN Verlag, https://www.grin.com/document/1334101
