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Financial constraints,cash flow volatility and corporate precautionary cash holdings |
GU Nai-kang SUN Jin-jun |
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Abstract Based on the precautionary motive of cash holdings, this paper examines the relationship between corporate cash holdings and cash flow volatility. The empirical evidence shows that cash holdings of financially constrained firms are more sensitive to cash flow volatility. The result confirms the corporate precautionary cash holdings for financially constrained firms. The result is also verified after using the propensity score to control the biases in estimation when observations are not allocated randomly.
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Received: 14 November 2008
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Corresponding Authors:
SUN Jin-jun
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