S&P 500 index addition, liquidity management and Tobin's Q

Research output: Indexed journal article Articlepeer-review

13 Citations (Scopus)


This study examines the revision in cash holdings and the market valuation of investment opportunities of 475 firms added to the Standard & Poor's 500 (S&P 500) stock market index from 1980 to 2010. We find that newly indexed firms have evolved to significantly lower cash balances, which we partially explain by the decreasing growth opportunities following index inclusion. Consistent with index inclusion loosening financial constraints, we document a larger decrease in cash for index inclusions in sectors with high financial dependence. We sort S&P 500 inclusions by corporate governance quality but do not find any empirical support that changes in cash and Tobin's Q are related to management entrenchment.

Original languageEnglish
Pages (from-to)479-508
Number of pages30
JournalAccounting and Finance
Issue number2
Publication statusPublished - 1 Jun 2016
Externally publishedYes


  • Cash holdings
  • Financial policy
  • S&P index effect
  • Tobin's Q


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