Corporate Cash Holdings and Exposure to Macroeconomic Conditions

YoungHa Ki () and Ramesh Adhikari
Additional contact information
YoungHa Ki: School of Business Administration, Widener University, Chester, PA 19073, USA
Ramesh Adhikari: School of Business, Cal Poly Humboldt, Arcata, CA 95521, USA

IJFS, 2022, vol. 10, issue 4, 1-25

Abstract: Determinants of a firm’s cash holdings have been a popular topic of research in finance, especially after the rapid surge in cash holdings for U.S. firms since the 1980s. The wide array of research has focused primarily on firm-specific factors to explain the cross-sectional variations but has found insufficient explanatory power for the variations in cash holdings. We incorporate variables for macroeconomic conditions and uncertainty with firm-specific variables. Using 19,223 firms with 213,663 firm-year observations from 1971 to 2019 and introducing five variables for macroeconomic conditions of the Aruoba–Diebold–Scotti index and three variables for macroeconomic and financial uncertainty, we find that a firm’s sensitivity to macroeconomic conditions and uncertainty plays important role in determining the level of cash holdings. We find supportive evidence from the robustness test with the firm’s age that variables for macroeconomic variables have an impact on the level of cash holdings irrespective of the firm’s age.

Keywords: corporate cash holdings; macroeconomic conditions; macroeconomic uncertainty; exposure to uncertainty; corporate governance; corporate liquidity; GARCH (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2227-7072/10/4/105/pdf (application/pdf)
https://www.mdpi.com/2227-7072/10/4/105/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jijfss:v:10:y:2022:i:4:p:105-:d:974626

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().