Cash management practices in Louisiana municipalities

Abstract

In this paper, we examine the cash management practices in the State of Louisiana and contrasted those practices with the rate of return on investment income due to cash management practices. Essentially, we framed various model hypotheses from the literature, which tells us that if those practices exist then we should see an increased rate of return due to cash management. In general, our research supported the literature but there were some interesting exceptions that merit attention.

Assessing Participation in the State‐Sponsored Local Government Investment Pool during the Recession: An Examination of North Carolina Counties

“…Approximately a decade later, Onwujuba and Lynch () examined the cash management practices in Louisiana cities with populations that exceeded 1,000. The study was divided into three cash management policy areas: collection and disbursement, investment practices, and banking relationships.…”

Investing During the Recession: How County Governments Utilized Idle Cash

“…First, Similar to the Coe (1988) study, the LGIP and CD were the preferred investment options. Second, larger governments in this study also had substantial preference for federal government securities similar to Onwujuba and Lynch (2002). Third, administrator decision making appeared to be based on uninterrupted cash flow so that basic service needs could be met (Guo, 2017).…”

“…After three rounds of survey dissemination, the response rate was approximately 54% or 79 responses. Small sample sizes such as this are indicative of many local government studies (Coe, 1988;Onwujuba & Lynch, 2002;Modlin, 2011;Modlin & Stewart, 2014). Respondents were asked to identify investment instruments from the list provided, the frequency of investment, and the amount of funds available for investment (FUNDS).…”

“…In particular, the state investment pool and CDs were the most popular option for investment as more than 80% of counties within the state with populations in excess of 25K invested some funding in these two options. Onwujuba and Lynch (2002) performed a comprehensive local government cash management study of 66 Louisiana municipalities with populations over 1K. The study examined virtually all phases of cash management from float reduction (bank services and relationships) to investment practices.…”

“…Additional organizational predictors have some basis in the literature. The use of some type of competitive bidding or the use of an (RFP) for bank service solicitation was found to be significant for investment return purposes (Onwujuba & Lynch, 2002). Part of the bank service package is collection methods as well as investment counseling.…”