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The Impact of Macroeconomic Uncertainty onNon-Financial Firms’ Demandf or Liquidity

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Listed:
  • Christopher F Baum,
  • Mustafa Caglayan
  • Neslihan Ozkan
  • Oleksandr Talavera

Abstract

This paper empirically investigates whether changes in macroeconomic volatility affect the effcient 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 manger 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.

Suggested Citation

  • Christopher F Baum, & Mustafa Caglayan & Neslihan Ozkan & Oleksandr Talavera, 2005. "The Impact of Macroeconomic Uncertainty onNon-Financial Firms’ Demandf or Liquidity," Working Papers 2005_26, Business School - Economics, University of Glasgow.
    • Handle: RePEc:gla:glaewp:2005_26
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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