Financial flexibility: Do firms prepare for recession?

Financial flexibility and corporate liquidity

“…The second, Ang and Smedema (2011) analyzes whether expected changes in frictions lead firms to boost their cash holdings. Specifically, Ang and Smedema investigate whether firms arrange their financial policies (mainly cash holdings) to prepare for future recessions.…”

Bank debt and trade credit for SMEs in Europe: firm-, industry-, and country-level determinants

“…The central concept is debt capacity, which refers to the ability of a firm to obtain all or part of its demand for debt financing (Cosh et al 2009;Levenson and Willard 2000;Ang and Smedema 2011).…”

Corporate diversification and firm value during economic downturns

“…It appears that diversified firms tend to reduce their relative net leverage in response to deteriorating lending conditions. Although, at a first glance, this result appears counterintuitive, the fact that conglomerates may increase their cash positions significantly during recessions to mitigate the increased probability of default and bankruptcy has been documented by numerous studies (see for example Ang & Smedema, 2011;Hirth & Viswanatha, 2011).…”