Abstract - The effect of stock price fluctuations on corporate cash flows

Fluctuations in stock prices affect corporate cash flows. When a firm’s own stock price
drops signicantly, the firm’s customers are less likely to delay payment on invoices. In effect,
customers are providing insurance to the firm. This insurance effect does not exist for private
firms. However, overall customers delay payment on invoices from publicly traded firms more
than twice as often as they delay payment on invoices from private firms. As far as we can
tell this is not driven by a difference in the average quality of the customers. Thus in terms of
corporate cash flows there are both costs and benefits to being publicly traded.

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