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

Baum, Christopher F. ; Caglayan, Mustafa ; Ozkan, Neslihan ; Talavera, Oleksandr

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URL:	http://ub-madoc.bib.uni-mannheim.de/117
URN:	urn:nbn:de:bsz:180-madoc-1178
Document Type:	Working paper
Year of publication:	2004
Publication language:	English
Institution:	Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series:	Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject:	330 Economics
Subject headings (SWD):	Makroökonomie
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 1957 - 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.
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Baum, Christopher F. ; Caglayan, Mustafa ; Ozkan, Neslihan ; Talavera, Oleksandr (2004) The Impact of Macroeconomic Uncertainty on Cash Holdings for Non-Financial Firms.

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BASE: Baum, Christopher F. ; Caglayan, Mustafa ; Ozkan, Neslihan ; Talavera, Oleksandr

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