TY - JOUR
T1 - The impact of macroeconomic uncertainty on non-financial firms' demand for liquidity
AU - Baum, C.F.
AU - Caglayan, M.
AU - Ozkan, N.
AU - Talavera, O.
PY - 2006
Y1 - 2006
N2 - This paper empirically investigates whether changes in macroeconomic volatility affect the efficient allocation of non-financial firms' liquid assets. We argue that higher uncertainty will hamper managers' ability to accurately predict firm-specific information and induce them to implement similar cash management policies. Contrarily, when the macroeconomic environment becomes more tranquil, each manager will have the latitude to behave more idiosyncratically as she can adjust liquid assets based on the specific requirements of the firm, bringing about a more efficient allocation of liquid assets. Our empirical analysis provides support for these predictions.
AB - This paper empirically investigates whether changes in macroeconomic volatility affect the efficient allocation of non-financial firms' liquid assets. We argue that higher uncertainty will hamper managers' ability to accurately predict firm-specific information and induce them to implement similar cash management policies. Contrarily, when the macroeconomic environment becomes more tranquil, each manager will have the latitude to behave more idiosyncratically as she can adjust liquid assets based on the specific requirements of the firm, bringing about a more efficient allocation of liquid assets. Our empirical analysis provides support for these predictions.
UR - http://www.scopus.com/inward/record.url?eid=2-s2.0-33751072694&partnerID=MN8TOARS
U2 - 10.1016/j.rfe.2006.01.002
DO - 10.1016/j.rfe.2006.01.002
M3 - Article
SN - 1058-3300
VL - 15
SP - 289
EP - 304
JO - Review of Financial Economics
JF - Review of Financial Economics
IS - 4
ER -