Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209972 
Year of Publication: 
2010
Series/Report no.: 
Working Paper No. 2010/27
Publisher: 
Norges Bank, Oslo
Abstract: 
We study how non-listed firms trade off financial, real, and distributive uses of cash. We show that firms' marginal value of cash (MVC) affects the mix of external and internal finance used to absorb fluctuations in cash flows; in particular, high-MVC firms employ substantially more external finance on the margin. Linking firms to their main bank, we find that shocks to bank finance affect corporate trade-offs and have real effects in high-MVC firms, making investment more sensitive to firm cash flows. Our analysis suggests that external finance constraints affect the real economy via firms' marginal value of cash.
Subjects: 
cash management
cash holdings
cost of external finance
non-listed firms
bank lending channel
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-584-7
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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