Please use this identifier to cite or link to this item:
Talavera, Oleksandr
Ozkan, Neslihan
Caglayan, Mustafa
Baum, Christopher F.
Year of Publication: 
Series/Report no.: 
DIW Discussion Papers No. 410
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
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.
Cash holdings
macroeconomic uncertainty
time series
non-financial firms
Document Type: 
Working Paper

Files in This Item:
328.29 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.