Business cycle and cash holdings: Empirical evidence from microfinance institutions

Hubert Tchakoute Tchuigoua, Christelle Simo and François Durrieu

Finance Research Letters, 2022, vol. 50, issue C

Abstract: This study aims to determine whether the cash holdings of financial organizations with a social mission respond to the business cycle. Applying a matching approach to an international sample of 8,271 MFI-year observations over the period 2003–2018, we find that liquidity in financial organizations with a social mission is countercyclical (negative co-movement). Our results also suggest that profit-oriented institutions exhibit countercyclical cash holding behavior. Finally, we observe that this countercyclical effect depends both on the quality of assets held by MFIs and their ability to target borrowers with a greater ability to repay loans during bad times.

Keywords: Business cycle; Microfinance; Liquidity; Developing economies (search for similar items in EconPapers)
JEL-codes: G21 G23 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004305

DOI: 10.1016/j.frl.2022.103228

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