Professor Kulchania published in elite Journal of Financial and Quantitative Analysis

Assistant Professor of Finance Manoj Kulchania had an article accepted for publication in the Journal of Financial and Quantitative Analysis (JFQA). 

The article, "Cash Reserves as a Hedge Against Supply-Chain Risk," was co-authored with Shawn Thomas at the Katz Business School, University of Pittsburgh. 

The JFQA publishes theoretical and empirical research in financial economics. Topics include corporate finance, investments, capital and security markets, and quantitative methods of particular relevance to financial researchers. The journal is published by the Michael G. Foster School of Business at the University of Washington in cooperation with the Arizona State University W. P. Carey School of Business and the University of North Carolina at Chapel Hill Kenan-Flagler Business School.

Abstract

Deregulation of the trucking industry and significantly lowered transportation costs led to large, widespread, and plausibly exogenous reductions in inventory for U.S. firms, but with consequent increased supply chain disruption costs. We find evidence that increased supply chain disruption costs help explain the puzzling long-term trend of increasing average U.S. firm cash holdings. We also find that firms facing higher expected costs of disruptions generally save more cash from capital freed-up via supply chain management innovations. Finally, we document significant post-disruption declines in cash holdings consistent with cash as a primary source of financing during disruptions.