Financial system

Issuer

Cash

Economics

Business

Cash management

External financing

Political science

Monetary economics

Debt

Cash flow forecasting

Revenue

Cash flow

Operating cash flow

Finance

Equity (law)

Review of Financial Studies

Given their actual revenue and spending, most net equity issuers and an overwhelming majority of net debt issuers would face immediate cash depletion without external financing. Debt issuers tend to have short-lived cash needs, while equity issuers often have persistent cash needs. On average, debt issuers immediately spend almost all of the proceeds, while equity issuers retain much of the proceeds in cash. Anticipated near-future cash needs and fixed costs of financing help explain the fraction of the proceeds being retained. Our findings support a funding-horizon theory in which cash needs and the nature of cash needs motivate financing decisions.

Corporate Cash Shortfalls and Financing Decisions