Our study focuses on the important issue of cash forecasting. The Wall Street
Journal (WSJ) published articles (1995, 2009) dealing with the record levels of cash
held by large publicly traded companies, asserting that cash positions may be excessive.
The articles discuss, at points in time, a trend over three decades of increasing
cash holdings which doubled from 1980 through 2006. The ability to forecast cash
holdings is an important element in deciding where to invest consistent with one’s
predilection, and may therefore become more important as cash holdings increase. In
contrast to prior research, our study demonstrates a forecasting model with firm-specific
variables. The results indicate a strong model in spite of changing economic
conditions; however, with significant turbulence (i.e. the 2008 market failure), we
find that certain coefficients are impacted.
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