Skip to main content
Article thumbnail
Location of Repository

The Impact of Macroeconomic Uncertainty on Cash Holdings for Non–Financial Firms

By Christopher F. Baum, Mustafa Caglayan, Neslihan Ozkan and Oleksandr Talavera

Abstract

This paper investigates the effects of macroeconomic volatility on non–financial firms’ cash holding behavior. Using an augmented cash buffer–stock model, we demonstrate that an increase in macroeconomic volatility will cause the cross–sectional distribution of firms’ cash–to–asset ratios to narrow. We test this prediction on a panel of non–financial firms drawn from the annual COMPUSTAT database covering the period 1970–2000, and find that as macroeconomic uncertainty increases, firms behave more homogeneously. Our results are shown to be robust to the inclusion of the levels of several macroeconomic factors

Topics: Cash holdings, macroeconomic uncertainty, panel data, time series, ARCH, non–financial firms
Publisher: Dept. of Economics, University of Leicester
Year: 2004
OAI identifier: oai:lra.le.ac.uk:2381/4639

Suggested articles

Citations

  1. (1966). A Rationalization of the Precautionary Demand for Cash. doi
  2. (1986). Capital and ownership structure: A comparison of U.S. and Japanese manufacturing corporations. doi
  3. (2002). Cash holdings among small businesses. doi
  4. (2004). Corporate cash holdings: An empirical investigation of UK companies. doi
  5. (1999). Corporate cash reserves and acquisitions. doi
  6. (2001). denton: Stata module to interpolate a quarterly flow series from annual totals via proportional Denton method.
  7. (2003). Do Persistent Large Cash Reserves Hinder Performance? doi
  8. (1996). Evidence on the Role of Cash Flow for Investment. doi
  9. (2003). Instrumental variables and GMM: Estimation and testing.
  10. (2003). International Corporate Governance and Corporate Cash Holdings. doi
  11. (2001). Monetary instability, the predictability of prices, and the allocation of investment: An empirical investigation using U.K. panel data. doi
  12. (1980). On Transactions and Precautionary Demand for Money. doi
  13. (2004). The Cash Flow Sensitivity of Cash. doi
  14. (1999). The determinants and implications of cash holdings. doi
  15. (1998). The determinants of corporate liquidity: Theory and evidence. doi
  16. (1936). The general theory of employment, interest and money. doi
  17. (2004). The second moments matter: the response of macroeconomic uncertainty on bank lending behavior. doi
  18. (1998). Who holds cash? and why?

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.