【IEF Seminar 36】Dr. Zhang Xiao: When do firms want to hold more cash? Precautionary cash holdings and equity issuance


IEF Xuan Zhang

At 10:30 on September 21, Dr. Zhang Xiao, an assistant professor from the School of Finance at Nankai University, held a seminar entitled “When do firms want to hold more cash? Precautionary cash holdings and equity issuance.” There were teachers from various colleges of Nanjing Audit University attended the seminar.

De. Zhang Xiao introduced that equity issuance has a significant impact on cash holdings both in terms of scale and correlation. They investigate whether the time-varying issuance costs will lead to firms hold excess cash because of precautionary reason? If so, firms will save more from equity issuance. They proposed two precautionary reasons, one is to prevent financing constraints and the other is used for growth purpose. Their empirical results suggest that financially constrained firms are more precautionary than unconstrained. However, the firms with high growth opportunities are less precautionary. This suggests that saving from equity issuance is more likely because firms worry about financing constraint but not growth options.

Dr. Zhang Xiao’s research is closely related to corporate investment behaviour. After the seminar, the teachers had a heated discussion with Dr. Zhang on issues such as corporate finance and asset pricing.