The Effect of Stock Market Fluctuations on Corporate Cash Flows

Frédéric Boissay, Murray Z. Frank, Reint Gropp
2009 Social Science Research Network  
Fluctuations in stock prices affect corporate cash ows. When a rm's own stock price drops signi cantly, the rm's customers are less likely to delay payment on invoices. In effect, customers are providing insurance to the rm. This insurance effect does not exist for private rms. However, overall customers delay payment on invoices from publicly traded rms more than twice as often as they delay payment on invoices from private rms. As far as we can tell this is not driven by a difference in the
more » ... difference in the average quality of the customers. Thus in terms of corporate cash ows there are both costs and bene ts to being publicly traded.
doi:10.2139/ssrn.1343760 fatcat:3vt62juovfgircncmukp6ytsaq