EconPapers    
Economics at your fingertips  
 

Firms cash management, adjustment cost and its impact on firms’ speed of adjustment: a cross country analysis

Qazi Amin () and Tom Williamson ()
Additional contact information
Tom Williamson: Coventry University

Review of Quantitative Finance and Accounting, 2021, vol. 56, issue 1, No 3, 53-89

Abstract: Abstract We investigate the firms’ specific attributes that determine the difference in speed of adjustment (SOA) towards the cash holdings target in the Scandinavian countries: Denmark, Norway and Sweden. We examine whether Scandinavian firms maintain an optimal level of cash holdings and determine if the active cash holdings management is associated with the firms’ higher SOA and lower adjustment costs. Our findings substantiate that a higher level of off-target cost induces professional managers to rebalance their cash level towards the optimal balance of cash holdings. Our results reveal that Scandinavian firms accelerate SOA towards cash targets primarily for the precautionary motive. Moreover, our results show that SOA is heterogeneous across Scandinavian firms based on adjustment cost and deviate cash holdings towards the target mainly with the support of internal financing. Furthermore, our empirical findings show that the SOA of Norwegian firms is significantly higher than the Danish and Swedish firms.

Keywords: Cash holdings; Speed of adjustment; Trade-off theory; Scandinavian countries; GMM (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s11156-020-00886-w Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:rqfnac:v:56:y:2021:i:1:d:10.1007_s11156-020-00886-w

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-020-00886-w

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2022-05-12
Handle: RePEc:kap:rqfnac:v:56:y:2021:i:1:d:10.1007_s11156-020-00886-w