Abstract

This research extends previous studies of cash holdings and presents the first empirical evidence on the relationship between cash holdings and internationalization. Using U.S. firms as sample, our findings reveal that Multinational Corporations (MNCs) have more cash holdings than Domestic Corporations (DCs), and that internationalization is a determinant of cash holdings. Furthermore, there is an inverted-U-shape relationship between cash holdings and internationalization. Specifically, a firm’s cash holdings rise as international expansion increases, but only at low levels of internationalization.  After a certain turning point, however, a firm’s cash holdings begin to fall with increasing internationalization.

Key words: Cash holding, internationalization, panel threshold regression model.