This study extends the literature on cash holdings and international business by analyzing in detail and separately the determinants of domestic and foreign cash holdings. Toward our objective, we use a unique, hand-collected sample of a country (Brazil) where publicly listed companies voluntarily disclosed information about their foreign cash relative to domestic cash separately. Using this unique sample from 2010 to 2021, we first document that foreign (domestic) cash holdings account, on average, for 2.88% (7.24%) of total assets and 29.63% of global cash. Additionally, the statistical analysis shows that companies that voluntarily disclose information about their foreign cash holdings accumulate significantly higher cash savings (10.12%) than the other companies (7.69%). Furthermore, consistent with our research hypothesis, we empirically demonstrate that foreign cash holdings are positively associated with global cash. This evidence supports the argument that Brazilian companies that earn revenue outside of Brazil are motivated to keep some of their foreign earnings abroad in the form of foreign cash to avoid repatriation taxes. Finally, our regression analysis shows that the variables frequently used in the cash management literature to explain the variations in global cash levels explain much better the variations in domestic than in foreign cash levels. Our paper contributes to the literature by being the first study to examine the determinants of foreign cash relative to domestic cash based on the real amount of foreign cash disclosed by companies. Our findings also provide useful information for policymakers as we highlight the need for increased disclosures about firms' foreign operations.
Comissão Organizadora
Anderson Odias da Silva
Claudia Yoshinaga
Ricardo D. Brito
Felipe Saraiva Iachan
Vinicius Augusto Brunassi Silva
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