Autores: R. Álvarez, A. Sagner, C. Valdivia
This paper addresses how cash holdings are affected in episodes of adverse liquidity shocks. Motivated by the recent financial crisis, we are particularly interested in understanding the magnitude of the impact on firms’ liquidity and the existence of potential heterogeneous effects according to firm size. We use a large panel dataset with quarterly information of Chilean firms during the period 1996 through 2009. We find three main results.
First, liquidity crises have had a negative and economically significant effect on cash holdings, but mostly for small firms. In contrast, our results show that medium and large firms are not affected by negative liquidity shocks. Second, liquidity crisis reduce the ability of firms to adjust to optimal cash holding. Finally, medium size firms are found to be less able to adjust cash holdings than small and large firms.