Abstract
The level of corporate cash holding is mainly affected by micro factors. In the past 20 years, the relationship between the level of cash holding and macroeconomic environmental factors has attracted more and more attention. This paper first briefly discusses three traditional theories of the level of cash holding, and proposes the leading role of trade-off theory and pecking order theory in this topic. Then, it sorts the relevant literature on macroeconomic fluctuations and macroeconomic policies.
Highlights
Because of its strong liquidity, cash, the “blood” of enterprises, is one of the important indicators of modern enterprise financial management
The level of corporate cash holding is mainly affected by micro factors
Many studies mainly focus on the impact of monetary policy on corporate cash holdings, and they agree that credit channel and interest rate channel play a major role in transmission (Jiang & Yu, 2013)
Summary
Because of its strong liquidity, cash, the “blood” of enterprises, is one of the important indicators of modern enterprise financial management. The research on the level of enterprises’ cash holding is mainly carried out from two aspects: influencing factors and economic consequences, while the research on influencing factors mainly focuses on the internal aspect, such as enterprise life cycle (Faff et al, 2016), corporate governance environment (Dittmar and Mahrt-Smith, 2007), equity structure (Huang & Ma, 2018). It should include the micro influencing factors inside the enterprise, and include the macroeconomic factors since enterprise is located in the macro environment. This paper first briefly introduces the relevant theories on the level of corporate cash holdings, and sorts the researches’ results based on the macroeconomic fluctuations and macroeconomic policies
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