Resource title

Uncertainty Determinants of Corporate Liquidity

Resource image

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Resource description

This paper investigates the link between the optimal level of non-financial firms? liquid assets and uncertainty. We develop a partial equilibrium model of precautionary demand for liquid assets showing that firms alter their liquidity ratio in response to changes in either macroeconomic or idiosyncratic uncertainty. We test this hypothesis using a panel of non-financial US firms drawn from the COMPUSTAT quarterly database covering the period 1993?2002. The results indicate that firms increase their liquidity ratios when macroeconomic uncertainty or idiosyncratic uncertainty increases.

Resource author

Christopher F. Baum, Mustafa Caglayan, Andreas Stephan, Oleksandr Talavera

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18526

Resource license

Adapt according to the presented license agreement and reference the original author.