"Corporations have accumulated record amounts of cash. Are these savings optimal or excessive? We examine this question by exploiting a Korean tax reform that sought to discourage cash savings by imposing a surtax on earnings that were not paid out to shareholders or invested. This tax applied only to firms with book equity above 50 billion wons or that belonged to a Chaebol. Difference-in-differences tests show that the treated firms reduced cash savings and increased payouts, wages, and investments. These additional investments appear profitable, and an event study analysis shows that shareholders viewed the reform as value-enhancing. These results are consistent with the accumulation of excessive savings before the reform, and we find evidence consistent with both agency-based and behavioral channels underlying such excessive savings."