Dutch corporate liquidity mangement: New evidence on aggregation
Allard Bruinshoofd () and
Clemens Kool ()
Journal of Applied Economics, 2004, vol. 7, 195-230
In this paper we investigate Dutch corporate liquidity management in general, and target adjustment behaviour in particular. To this purpose, we use a simple error correction model of corporate liquidity holdings applied to firm-level data for the period 1977-1997. We confirm the existence of long-run liquidity targets at the firm level. We also find that changes in liquidity holdings are driven by short-run shocks as well as the urge to converge towards targeted liquidity levels. The rate of target convergence is higher when we include more firm-specific information in the target. This result supports the idea that increased precision in defining liquidity targets associates with a faster observed rate of target convergence. It also suggests that the slow speeds of adjustment obtained in many macro studies on money demand are artefacts of aggregation bias.
Keywords: corporate liquidity demand; precautionary liquidity (search for similar items in EconPapers)
JEL-codes: C33 C43 E41 G3 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Journal Article: Dutch corporate liquidity management: New evidence on aggregation (2004)
Working Paper: Dutch corporate liquidity management: new evidence on aggregation (2004)
Working Paper: Dutch Corporate Liquidity Management: New Evidence on Aggregation (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cem:jaecon:v:7:y:2004:n:2:p:195-230
Access Statistics for this article
Journal of Applied Economics is currently edited by Germán Coloma and Mariana Conte Grand and Jorge M. Streb
More articles in Journal of Applied Economics from Universidad del CEMA Contact information at EDIRC.
Bibliographic data for series maintained by Valeria Dowding ().