CORPORATE CASH HOLDINGS

There have been several cases in recent years-most notably, Chrysler-in which shareholders have objected to the level of companies' holdings of cash and other liquid assets. This paper describes the authors' study of the determinants of liquid asset holdings by publicly traded U.S. firms and how these holdings change over time. For those companies that appear to hold excess cash, the study also attempts to investigate whether such companies have a tendency to reduce value by "overinvesting"-a tendency described in the academic finance literature as the "free cash flow problem." 2001 Morgan Stanley.