A Replication Study of “Why Do Cities Hoard Cash?” (<i>The Accounting Review</i> 2009)

Abstract

Gore’s article explores the determinants and implications of cash reserves. Here, we replicate Gore’s finding of a positive relationship between environmental uncertainty and municipal fund balances using the same data, the same specifications, and the same econometric software. We also test the robustness of her original findings by adding years and observations. We show that the empirical results reported in Gore’s article are largely replicable and that its results are robust to substantial data extensions. Nevertheless, we believe that Gore reaches normative conclusions that municipalities hold “excess cash reserves,” which are not justified by her empirical results.