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Government Deficits and Corporate Liquidity

Author

Listed:
  • Naiwei Chen
  • Siting Yo

Abstract

This study examines the relationship between government deficit and corporate liquidity (cash holdings). Using data of nonfinancial firms in Taiwan from 1981 to 2009, this study finds that corporate liquidity is lower when government deficit is higher. In addition, corporate liquidity is related with other macroeconomic conditions, such as inflation, short-term interest rate, and economic growth. More precisely, results indicate that inflation and interest rates have a negative impact on corporate liquidity that is aggravated when government deficit is higher. Economic growth has a positive impact on corporate liquidity, and such positive impact is weakened when government deficit is higher.

Suggested Citation

  • Naiwei Chen & Siting Yo, 2012. "Government Deficits and Corporate Liquidity," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(1), pages 59-75.
    • Handle: RePEc:asi:aeafrj:v:2:y:2012:i:1:p:59-75:id:737
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    File URL: https://archive.aessweb.com/index.php/5002/article/view/737/1187
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    Citations

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    Cited by:

    1. Fryderyk Mirota & Natalia Nehrebecka, 2018. "Determinanty transakcyjnej rezerwy płynności w spółkach giełdowych w Polsce," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 75-102.
    2. Fryderyk Mirota & Natalia Nehrebecka, 2020. "Dynamika dostosowań transakcyjnej rezerwy płynności przedsiębiorstw do poziomu optymalnego," Bank i Kredyt, Narodowy Bank Polski, vol. 51(6), pages 613-638.
    3. Natalia Nehrebecka & Anna Białek-Jaworska, 2016. "Determinanty inwestycji finansowych przedsiębiorstw w Polsce," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 35-55.

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