The Marginal Value of Cash: Corporate Savings, Investment, and Financing
- Authors
- Type
- Published Article
- Journal
- Annual Review of Financial Economics
- Publisher
- Annual Reviews
- Publication Date
- Nov 01, 2024
- Volume
- 16
- Issue
- 1
- Pages
- 295–324
- Identifiers
- DOI: 10.1146/annurev-financial-111021-103759
- Source
- Annual Reviews
- Keywords
- License
- Green
- External links
Abstract
The fact that internal liquidity is a key source of corporate funding puts the marginal value of cash at the center of a variety of firm decisions, including investment, payout, financing, savings, and risk management policies. The marginal value of cash is inherently a dynamic concept, because a firm facing financing frictions has to be forward-looking, managing its asset and liability structures in a unified framework and carefully trading off the use of liquidity across time and states. We present a dynamic framework for corporate liquidity management and survey the related literature, with a focus on the determinants of the marginal value of cash and its ubiquitous role in firm decisions.
