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Non-Linear Target Adjustment in Corporate Liquidity Management: An Endogenous Thresholds Approach

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Author Info
W. Allard Bruinshoofd
Clemens J. M. Kool

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Abstract

We provide new empirical evidence on non- linear liquidity management in Dutch firms. Our results reveal that liquidity adjustment from below the target is significantly faster than from above. We find no evidence for bands of inaction around the target.

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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 087.

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Date of creation: Feb 2006
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Handle: RePEc:dnb:dnbwpp:087

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Related research
Keywords: Corporate liquidity management; Non-linear adjustment; Endogenous thresholds; Panel approach.;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
G3 - Financial Economics - - Corporate Finance and Governance

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  1. Bar-Ilan, Avner & Perry, David & Stadje, Wolfgang, 2004. "A generalized impulse control model of cash management," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1013-1033, March. [Downloadable!] (restricted)
  2. Ozkan, Aydin & Ozkan, Neslihan, 2004. "Corporate cash holdings: An empirical investigation of UK companies," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2103-2134, September. [Downloadable!] (restricted)
  3. Stewart C. Myers & Raghuram G. Rajan, 1998. "The Paradox Of Liquidity," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 733-771, August. [Downloadable!] (restricted)
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  4. Allard Bruinshoofd & Clemens J.M. Kool, 2004. "Dutch Corporate Liquidity Management: New Evidence on Aggregation," Working Papers 04-05, Utrecht School of Economics. [Downloadable!]
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  5. Bruce E. Hansen, 1997. "Threshold effects in non-dynamic panels: Estimation, testing and inference," Boston College Working Papers in Economics 365, Boston College Department of Economics. [Downloadable!]
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  6. Opler, Tim & Pinkowitz, Lee & Stulz, Rene & Williamson, Rohan, 1999. "The determinants and implications of corporate cash holdings," Journal of Financial Economics, Elsevier, vol. 52(1), pages 3-46, April. [Downloadable!] (restricted)
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  7. Milne, Alistair & Robertson, Donald, 1996. "Firm behaviour under the threat of liquidation," Journal of Economic Dynamics and Control, Elsevier, vol. 20(8), pages 1427-1449, August. [Downloadable!] (restricted)
  8. Kim, Chang-Soo & Mauer, David C. & Sherman, Ann E., 1998. "The Determinants of Corporate Liquidity: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 335-359, September. [Downloadable!]
  9. Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2004. "The Cash Flow Sensitivity of Cash," Journal of Finance, American Finance Association, vol. 59(4), pages 1777-1804, 08. [Downloadable!] (restricted)
  10. Ono, Masanori, 2003. "A computational approach to liquidity-constrained firms over an infinite horizon," Journal of Economic Dynamics and Control, Elsevier, vol. 28(1), pages 189-205, October. [Downloadable!] (restricted)
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