Christopher F. Baum () (Boston College, DIW Berlin) Mustafa Caglayan (University of Sheffield) Neslihan Ozkan () (University of Bristol) Oleksandr Talavera () (DIW Berlin)
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This paper empirically investigates whether changes in macroeconomic volatility affect the efficient allocation of non-financial firms' liquid assets. We argue that higher uncertainty will hamper managers' ability to accurately predict firm-specific information and induce them to implement similar cash management policies. Contrarily, when the macroeconomic environment becomes more tranquil, each manager will have the latitude to behave more idiosyncratically as she can adjust liquid assets based on the specific requirements of the firm, bringing about a more efficient allocation of liquid assets. Our empirical analysis provides support for these predictions.
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Length: 34 pages Date of creation: 23 Dec 2002 Date of revision:
15 Dec 2005 Publication status: Published, Review of Financial Economics, 15, 289-304, 2006. Handle: RePEc:boc:bocoec:552
Note: Previously circulated as "The Impact of Macroeconomic Uncertainty on Cash Holdings for Non-Financial Firms" Contact details of provider: Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA Phone: 617-552-3670 Fax: +1-617-552-2308 Email: Web page: http://fmwww.bc.edu/EC/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Christopher F Baum).
Find related papers by JEL classification: E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
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