Product innovation and the value of corporate cash holdings

In this study, I examine whether the product innovation affect the value of cash holdings. A dollar held in a corporation may differ across corporations. The results indicate that the value of dollar increases as the product innovation increases. This is the first study to test if corporate characteristics (i.e., product innovation) affect the value of cash held in a corporation. Therefore, the findings in this study imply that firms with poor product innovation may waste cash quickly and that firms result in reduction of the overall value of organization. This study contributes to the prior study as follows. First, the study extends the stream of product innovation and its effects on firm values by providing new evidence with the precise measure of product innovation. Second, this is the first study to examine the direct relationship between the product innovation and the value of a dollar owned by corporations.