Thesis Submission Date

Fall 2011

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

George Batta

Reader 2

Gregory Hess

Rights Information

© 2011 Yun Lai (William) Li

Abstract

The paper explores the driving forces behind corporate cash holdings by analyzing past literature and extending this research to the behavior of firms after the 2008 recession. I look at the cash to assets and net debt to assets ratios from October 1980 to October 2011 to obtain an understanding of the past and current state of cash holdings. A comprehensive literature review is done on agency costs and transactional motives to give the reader an overview of the costs and benefits of holding cash. This provides the foundation for the precautionary motives for companies today to keep cash as a risk management tool.

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