While critics have raised alarms about the rising cash holdings on corporate balance sheets, there are broader, long-term reasons for the move to cash that go far beyond a knee-jerk reaction by business to current economic uncertainty, according to a new report from the C.D. Howe Institute. In “Not Dead Yet: The Changing Role of Cash on Corporate Balance Sheets,” Finn Poschmann finds corporate cash holdings have increased in waves over the past quarter-century in response to changing economic conditions and business process improvements.
“The critics’ outcry over corporate cash hoards, which has gone so far as to accuse business of malfeasance, is mistaken,” commented Poschmann. “A closer look suggests more to the story.”