a)Explain the three theories of cash holdings including: trade-off theory,pecking ordertheory and agency conflict theory. (30 marks)
b)Based on the empirical evidence in Faulkender and Wang (2006) andDittmar and Mahrt-Smith (2007), discuss the relationship between the value of cash holdings andcorporate characteristics, including corporate leverage, cash reserves, financial constraintsand the quality of corporate governance.
Explain the three theories of cash holdings including: trade-off theory,pecking ordertheory and agency conflict theory.
