Understanding Precautionary Cash at Home and Abroad
What has driven the dramatic rise in U.S. corporate cash? Using non-public data, we show that the run-up is not uniform across firms and is greatest in the foreign subsidiaries of multinational firms. Standard precautionary motives explain domestic cash holdings but not these bourgeoning foreign cash balances. Falling foreign tax rates, coupled with relaxed restrictions on income shifting, are the root of the changing foreign cash patterns. IP intensive firms have the greatest ability to shift income to low tax jurisdictions and their foreign subsidiaries are where we observe the largest accumulations of cash
Mitchell A. Petersen, Michael Faulkender, Kristine W Hankins
Petersen, A. Mitchell, Michael Faulkender, and Kristine W Hankins. 2018. Understanding Precautionary Cash at Home and Abroad.