Multinational cash management and conglomerate discounts in the euro zone

We discuss the impact of liberalisation, deregulation and the introduction of a single currency on cash management within multinationals in the euro zone. The developments in the euro zone reduce financial market imperfections in transferring cash and diminish the need for separate local cash holdings. This facilitates the centralisation of cash management and headquarters' financial control. Increased financial power of multinational headquarters, moreover, offers opportunities for disintermediation. By exploiting these options multinationals in the euro zone can start to reap additional benefits of internal financing and conglomerate discounts of euro zone multinationals may diminish.

Negative Interest Rates, COVID-19, and the Finances of Listed Euro Firms

Aim: The paper measures the impact of negative interest rates on listed firms in the original euro zone countries. It also measures the impact of the first COVID-19 year.Design / research methods: The paper uses panel data to measure the influence of the short-term ECB deposit rate and the 10-years German bond yield on short-term and long-term firm variables. Cross section fixed effects are applied to first differences and dummy variables. For liquidity and non-liquid assets the effects are also measured for small and large companies, for sectors, and for countries.Conclusions / findings: Corporate liquidity ratios and creditor ratios decline when short-term ECB-rates fall. If ECB rates are negative, liquidity ratios are further reduced by 0.6 percentage points. Declining long-term German government bond yields increase non-liquid assets, while negative yields boost these assets by 4.5% extra. In the first COVID-19 year, the investments in non-liquid assets were 7.6% smaller, while liquidity ratios increased by 2.3 percentage points.Originality / value of the article: Papers on the influence of negative interest rates and of COVID-19 on European firms are unavailable. This makes the paper relevant for firm managers and policy makers and a benchmark for future research.Implications of the research: Because the issues addressed are new, further research is valuable. One may think of comparable studies for different countries. Many other suggestions for further research are given in the conclusions