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.