Why Are Companies Sitting on $1.8 Trillion?

By Derek Thompson

Blame uncertainty. Blame regulations. Blame low demand. Blame ... globalization?

One explanation, said finance professor René Stulz at Ohio State University, is that as competition has become more global, it's become harder for individual companies to survive, and so they hold on to more cash to be safe. He added that companies have also increased their cash holdings in the wake of the financial crisis, particularly since the bankruptcy of Lehman Brothers in September 2008, as the banking system has become more fragile and credit has become scarce.

Tech companies in particular tend to build large cash reserves. Intel, which reported on Tuesday its biggest quarterly profit in a decade, brought aboard 400 new employees worldwide in the last quarter, though it would not identify in which countries the hirings took place. Intel spokeswoman Lisa Malloy added that the firm expects to spend more money, from $4.5 billion last year to $5.2 billion this year, investing in capital projects around the world.

Read the full story at the Washington Post.

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http://www.theatlantic.com/business/archive/2010/07/why-are-companies-sitting-on-18-trillion/59837/