12 research outputs found
Firms cash management, adjustment cost and its impact on firms’ speed of adjustment-A cross country analysis
We investigate the firms’ specific attributes that determine the difference in speed of adjustment
(SOA) towards the cash holdings target in the Scandinavian countries: Denmark,
Norway and Sweden. We examine whether Scandinavian firms maintain an optimal level
of cash holdings and determine if the active cash holdings management is associated with
the firms’ higher SOA and lower adjustment costs. Our findings substantiate that a higher
level of off-target cost induces professional managers to rebalance their cash level towards
the optimal balance of cash holdings. Our results reveal that Scandinavian firms accelerate
SOA towards cash targets primarily for the precautionary motive. Moreover, our results
show that SOA is heterogeneous across Scandinavian firms based on adjustment cost and
deviate cash holdings towards the target mainly with the support of internal financing. Furthermore,
our empirical findings show that the SOA of Norwegian firms is significantly
higher than the Danish and Swedish firms
Financial flexibility, corporate investment and performance: evidence from financial crises
noThis study examines the impact of financial flexibility on the investment and
performance of East Asian firms over the period 1994–2009. We employ a sample of 1,068
firms and place particular emphasis on the periods of the Asian crisis (1997–1998) and the
recent credit crisis (2007–2009). The results show that firms can attain financial flexibility,
primarily through conservative leverage policies and less commonly by holding large cash
balances. Financial flexibility appears to be an important determinant of investment and
performance, mainly during the Asian 1997–1998 crisis. In particular, firms that are
financially flexible prior to this crisis (1) have a greater ability to take investment
opportunities, (2) rely much less on the availability of internal funds to invest, and
(3) perform better than less flexible firms during the crisis. Our analysis covering the credit
crisis period of 2007–2009 suggests that some of the advantages of flexible firms towards
investing persist but are significantly less pronounced over that period. We also find that
the value of financial flexibility is region/country specific, which may be explained by the
fact that different regions/countries often adopt different macroeconomic policies and
operate in diverse economic/legal environments