Do firms park capital? Evidence from the U.S. Manufacturing sector

Paul Moon Sub Choi, Francis Joonsung Won

Research output: Contribution to journalArticlepeer-review


This study uses the “cost of carry” (CoC) measure to identify the motive for corporate cash holdings. Based on the historical, moving-average holdings of currency and liquid assets, the measure represents the net opportunity cost of corporate demand for money. This study finds that large manufacturing firms in the U.S. park their capital in short-term assets appealing to the agency motive for cash holdings. Because dividend-paying firms can choose to distribute their capital to equity shareholders when their investment opportunities are unfavorable, these firms might show a non-positive association between capital expenditure and the CoC measure, championing the transactions motive. Still, dividend-paying large firms exhibit an overall positive correlation, suggesting that they park their capital on the agency motive. A detailed literature review and discussions are followed.

Original languageEnglish
Pages (from-to)194-202
Number of pages9
JournalInvestment Management and Financial Innovations
Issue number2
StatePublished - 2018

Bibliographical note

Publisher Copyright:
© Paul Moon Sub Choi, Francis Joonsung Won, 2018.


  • Agency cost
  • Cash holdings
  • Corporate governance
  • Cost of carry
  • Motives of cash holdings
  • Tobin’s Q


Dive into the research topics of 'Do firms park capital? Evidence from the U.S. Manufacturing sector'. Together they form a unique fingerprint.

Cite this