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

Qazi Awais Amin; Tom Williamson

doi:10.1007/s11156-020-00886-w

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

Qazi Awais Amin, Tom Williamson

School of Economics, Finance and Accounting

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

30 Downloads (Pure)

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.

Original language	English
Pages (from-to)	53-89
Number of pages	37
Journal	Review of Quantitative Finance and Accounting
Volume	56
Issue number	1
Early online date	8 May 2020
DOIs	https://doi.org/10.1007/s11156-020-00886-w
Publication status	Published - Jan 2021

Bibliographical note

The final publication is available at Springer via http://dx.doi.org/10.1007/s11156-020-00886-w

Copyright © and Moral Rights are retained by the author(s) and/ or other copyright owners. A copy can be downloaded for personal non-commercial research or study, without prior permission or charge. This item cannot be reproduced or quoted extensively from without first obtaining permission in writing from the copyright holder(s). The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the copyright holders.

Keywords

Cash holdings
GMM
Scandinavian countries
Speed of adjustment
Trade-off theory

ASJC Scopus subject areas

Accounting
Business, Management and Accounting(all)
Finance

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10.1007/s11156-020-00886-w

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Cite this

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abstract = "We investigate the firms{\textquoteright} 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{\textquoteright} 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.",

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

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

Access to Document

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