Cash is something everyone loves to have, especially businesses. There is a lot that companies can do with cash: boost inventories, raise wages, make capital expenditures, pay down debt, return money to shareholders via buybacks or dividends--or snap up other companies. But can companies have too much cash?
SMU School of Accountancy Assistant Professor Yuanto Kusnadi believes that while cash is the most liquid asset on the balance sheet, it is also the most easily expropriated by corporate insiders.
So, how should investors and the market perceive the cash reserves position of a company? What is the correlation between a company's cash reserves and its future market share and stock value growth? Is cash really king, and for whom?
In this podcast, Assistant Professor Kusnadi, who studies corporate financial policy, discusses more about his research into cash-rich companies and why a healthy bank balance may be more than meets the eye.