Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/232544
Authors: 
Hoang, Daniel
Silbereis, Fabian
Stengel, Raphael
Year of Publication: 
2021
Series/Report no.: 
KIT Working Paper Series in Economics No. 149
Abstract: 
Recent empirical evidence suggests that US industrial firms invest heavily in noncash, risky financial assets. Using hand-collected data on financial portfolios of German firms, we show that risky asset holdings are not an anomaly unique to the US. We find that industrial firms in Germany invest 11.6% of their financial assets in noncash and risky assets. Value-weighted, this percentage increases to 25.4%. While the equally-weighted average is substantial, it is clearly lower (5 percentage points or 30% in relative terms) than that in the US. After accounting for cross-country compositional differences (especially the dominance of large firms in the US technology sector), this difference in risky financial asset holdings decreases but remains at 3 percentage points. The remaining difference is driven by institutional differences that affect the relationship between firm characteristics and risky financial asset holdings in the two countries. In contrast to the US, German firms largely follow the precautionary savings motive and do not seem to misappropriate their funds when shifting them towards riskier asset allocations. Our results have implications for how asset management by nonfinancial firms should be regulated.
Subjects: 
Cash Policy
Financial Portfolio
Precautionary Savings
Liquidity Management
JEL: 
G31
G32
G34
G38
G11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.