– The purpose of this paper is to examine cash savings from six potential sources of cash: net equity issues, net debt issues, internally generated cash flows, asset sales, changes in short-term debt, and changes in net working capital.
– The authors use both fixed effects and dynamic panel-data estimations to examine cash savings by using a sample of firms from 72 countries for the period 1991-2010.
– The authors observe that net equity issue is the largest source of new funds while cash savings rates are highest for asset sales, changes in net working capital, and net equity issues. Constrained firms have higher total savings rates than unconstrained companies. The authors also find that savings rates are positively related to whether firms perform R&D, multinational status, and protection for creditors and investors.
– The results suggest that firms usually use multiple channels when they increase their savings as opposed to relying only on one channel.
