The existing literature posits that large corporate cash holdings might induce agency problems and thus hinder firms' operating performance. This paper investigates how Japanese firms maintain high/low cash holding position during the late 1980s and early 1990s. I find that firms pile cash because there is no profitable project. On the other hand, firms maintain a low cash holding position due to over-investing. I also find that excess cash holdings significantly affect firms' operating performance. Lastly, I find no direct evidences that ownership structure affect firms operating performance.
Journal of Management Accounting, Japan: Supplement, 75-99