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Do nonfinancial firms hold risky financial assets? Evidence from Germany

Hoang, Daniel; Silbereis, Fabian; Stengel, Raphael

Abstract (englisch):
Recent empirical evidence suggests that US industrial firms invest heavily in noncash, risky financial assets. Using hand-collected data on financial portfolios of German firms, we show that risky asset holdings are not an anomaly unique to the US. We find that industrial firms in Germany invest 11.6% of their financial assets in noncash and risky assets. Value-weighted, this percentage increases to 25.4 %. While the equally-weighted average is substantial, it is clearly lower (5 percentage points or 30% in relative terms) than that in the US. After accounting for cross-country compositional differences (especially the dominance of large firms in the US technologysector), this difference in risky financial asset holdings decreases but remains at 3 percentage points. The remaining difference is driven by institutional differences that affect the relationship between firm characteristics and risky financial asset holdings in the two countries. In contrast to the US, German firms largely follow the precautionary savings motive and do not seem to misappropriate their funds when shifting them towards riskier asset allocations. ... mehr

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Volltext §
DOI: 10.5445/IR/1000130762
Veröffentlicht am 19.03.2021
Cover der Publikation
Zugehörige Institution(en) am KIT Institut für Volkswirtschaftslehre (ECON)
Publikationstyp Forschungsbericht/Preprint
Publikationsjahr 2021
Sprache Englisch
Identifikator ISSN: 2190-9806
KITopen-ID: 1000130762
Verlag Karlsruher Institut für Technologie (KIT)
Umfang 58 S.
Serie Working paper series in economics ; 149
Schlagwörter Cash Policy, Financial Portfolio, Precautionary Savings, Liquidity Management
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