Uncertainty Determinants of Corporate Liquidity

Christopher Baum, Mustafa Caglayan (), Andreas Stephan and Oleksandr Talavera ()

Working Papers from Business School - Economics, University of Glasgow

Abstract: 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 change their liquidity ratio in response to changes in either macroeconomic or idiosyncratic uncertainty. We test this proposition 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.

JEL-codes: C23 D8 D92 G32 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-bec, nep-cba and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Uncertainty determinants of corporate liquidity (2008)
Working Paper: Uncertainty Determinants of Corporate Liquidity (2006)
Working Paper: Uncertainty Determinants of Corporate Liquidity (2006)
Working Paper: Uncertainty Determinants of Corporate Liquidity (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2006_1

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