Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18106
Authors: 
Talavera, Oleksandr
Ozkan, Neslihan
Caglayan, Mustafa
Baum, Christopher F.
Year of Publication: 
2004
Series/Report no.: 
DIW Discussion Papers No. 410
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
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.
Subjects: 
Cash holdings
macroeconomic uncertainty
time series
ARCH
non-financial firms
Document Type: 
Working Paper

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