Cash Holding and Firm Value: Evidence from the US Market from 1999 to 2015

This paper investigates the effect of cash holding on firm value based on a sample of the US industrial firms during the period from 1999 to 2015. The study tests the existence of a linear relationship between cash holdings and firm value. This study also investigates whether there exists an optimum cash level (a non-linear relationship where after a certain level of cash, corporate value declines). This paper uses fixed effect model on unbalanced panel data of listed the US companies (exclude financial firms) during the period of 1999-2015. Our results suggest that there is a positive linear relationship between cash holding and firm value. In addition, the results do also support the hypothesis that there exists an optimum level of cash holding for the US industrial firms from 1999 to 2015.