Excessive Cash Hoarding Can Destroy Shareholder Value

Excessive Cash Hoarding Can Destroy Shareholder Value

The Wall Street Journal published a front page article this morning regarding how many companies are hoarding record high levels of cash. The tendency to hoard liquid assets can be viewed as a “survival instinct” in light of the turmoil in the financial markets and specifically the near death experience many companies faced when the commercial paper market ground to a halt during the worst of the financial crisis. However, taken to extreme levels, this hoarding instinct can clearly destroy shareholder value.

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