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Cash holdings speed of adjustment

Svetlana V. Orlova and Ramesh Rao ()

International Review of Economics & Finance, 2018, vol. 54, issue C, 1-14

Abstract: This study examines the speed of adjustment of cash holdings and extends the recent work that highlights the importance of accounting for heterogeneity of the speed of adjustment of cash holdings. The results indicate that firms with cash deficits, rated firms and firms with financial surpluses have a slower speed of adjustment, while firms with excess cash, non-rated firms and firms that have financial deficit adjust towards the target faster. Overall, the results support the idea that firms have a target level of cash holdings, however, costs of adjustment as well as costs of non-adjustment affect the speed with which firms adjust towards the target.

Keywords: Cash holdings; Speed of adjustment (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:54:y:2018:i:c:p:1-14

DOI: 10.1016/j.iref.2017.12.011

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