Toni M. Whited from the University of Wisconsin, Madison, is giving a VGSF
research seminar on "The Corporate Propensity to Save" on FRIDAY, May 18th,
from 15:30 to 17:00 in HS 7 at the BWZ, Brünnerstrasse 72, 1210 Wien. See
the VGSF webpage (Activities & Events --> Research Seminars) for a map of
the location, the paper to download (soon) and this term's entire schedule
of seminars.
Please find the paper's abstract below.
Best,
Michael Halling
Abstract
We study corporate saving in a stochastic, dynamic model of the firm with
endogenous choices of external finance, distributions, cash, and investment.
Intertemporal trade-offs between costly external finance and interest income
taxation determine optimal savings. Unlike static models, our model produces
negative propensities to save out of income because firms lower cash
reserves to invest after receiving good productivity news, and vice versa.
OLS regressions using international data replicate positive saving
propensities found previously. However, treating measurement error in
Tobin's q produces negative propensities, consistent with our model.
Empirically, income uncertainty matters more for saving than the cost of
external finance.