Working paper
Cash Heterogeneity and the Payout Channel of Monetary Policy
SSRN
01/13/2021
DOI: 10.2139/ssrn.3758539
Abstract
This paper provides novel empirical evidence that cash-rich firms have higher equity payouts and higher stock prices in response to expansionary monetary policy surprises. Stock prices rise despite weak cash flow, investment, and credit responses to monetary policy. I rationalize the empirical evidence in a heterogeneous firm New Keynesian model where firms finance investment with cash and equity issuance. Monetary easing weakens precautionary cash demand, leading cash-rich firms to optimally allocate excess funds to shareholders. Since payouts are procyclical, cash-rich firms earn higher returns in expansionary periods. My findings highlight a payout channel through which monetary policy impacts asset prices.
Details
- Title: Subtitle
- Cash Heterogeneity and the Payout Channel of Monetary Policy
- Creators
- Altan Pazarbasi
- Resource Type
- Working paper
- DOI
- 10.2139/ssrn.3758539
- Publisher
- SSRN
- Number of pages
- 110 pages
- Language
- English
- Date posted
- 01/13/2021
- Date updated
- 09/30/2025
- Academic Unit
- Finance
- Record Identifier
- 9984963427802771
Metrics
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