“We are starting to get out of hunker-down mode, so what you have now is a bunch of cash-hoarders who have decided to take that cash out of their balance sheets,” David Ikenberry, dean of the University of Colorado’s business school, said in the WSJ article. “Is that a good thing? It probably is. They’re liberating capital and putting it back out into the capital markets, and letting that multiplier effect kick in.”
Companies have been hoarding money over the past few years as they cut costs or take advantage of the historically low interest rates to borrow and refinance. According to the Federal Reserve, corporations, excluding financial companies, held $1.79 trillion in cash as of the fourth quarter of 2012, compared to $1.77 trillion in the third quarter.
“Corporations are flush with cash and that cash sitting in the corporate coffers is earning next to nothing,” Rob Leiphart, an analyst at Birinyi, said in the article. “Companies have to do something with it.”
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Max Chen contributed to this article.