DEBT STRUCTURE AND CORPORATE CASH HOLDINGS

The relationship between the cash and leverage is still puzzling in literature. This paper fills this gap by examining how debt heterogeneity and derived debt structure are related with corporate cash holdings. We find that corporate cash holdings have a strong relationship with the structure of debt, and the direction of relationship varies depending on the type of debt. In particular, corporate cash holdings are negatively correlated with the proportion of secured debt, short-term debt, commercial paper and bank debt. On the other hand, firms show the opposite direction of cash holding behavior as they have a larger proportion of subordinated debt, longterm debt and convertible bonds. This paper provides a new insight on the understanding of relation between corporate cash holdings and leverage policy.