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Uncertainty Determinants of Corporate Liquidity Author info | Abstract | Publisher info | Download info | Related research | Statistics Christopher F. Baum
Mustafa Caglayan
Andreas Stephan
Oleksandr Talavera
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This paper investigates the link between the optimal level of non-financial firms' liquid assets and uncertainty. We develop a partial equilibrium model of precautionary demand for liquid assets showing that firms alter their liquidity ratio in response to changes in either macroeconomic or idiosyncratic uncertainty. We test this hypothesis using a panel of non-financial US firms drawn from the COMPUSTAT quarterly database covering the period 1993-2002. The results indicate that firms increase their liquidity ratios when macroeconomic uncertainty or idiosyncratic uncertainty increases.
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number
633.
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Length: 32 p.
Date of creation: 2006Date of revision:
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Keywords: liquidity uncertainty non-financial firms dynamic panel data Other versions of this item:
Paper Christopher F. Baum & Mustafa Caglayan & Andreas Stephan & Oleksandr Talavera, 2006.
"Uncertainty Determinants of Corporate Liquidity ,"
Working Papers
2006_1, Department of Economics, University of Glasgow.
[Downloadable!] Oleksandr Talavera & Christopher Baum & Mustafa Caglayan & Andreas Stephan, 2005.
"Uncertainty Determinants of Corporate Liquidity ,"
Money Macro and Finance (MMF) Research Group Conference 2005
73, Money Macro and Finance Research Group.
[Downloadable!] Christopher F. Baum & Mustafa Caglayan & Andreas Stephan & Oleksandr Talavera, 2005.
"Uncertainty Determinants of Corporate Liquidity ,"
Boston College Working Papers in Economics
634, Boston College Department of Economics, revised 09 Oct 2006.
[Downloadable!] Find related papers by JEL classification: C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data D8 - Microeconomics - - Information, Knowledge, and Uncertainty D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
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