We examine determinants and implications of holdings of and marketable securities by publicly traded U.S. firms in 1971-1994 period. with strong growth opportunities and riskier flows hold relatively high ratios of total assets. Firms that have greatest access capital markets (e.g. large firms and those with credit ratings) tend hold lower ratios of total assets. These results are consistent with the view that firms hold liquid assets ensure that they will be able keep investing when cash flow too low relative planned investment and when outside funds are expensive. short run impact of excess on capital expenditures, acquisition spending and payouts to shareholders small. The main reason that firms experience large changes in excess is occurrence of operating losses. There no evidence that risk management and cash holdings are substitutes.
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