The Effect of Firm Cash Holdings on Monetary Policy

Adão, Bernardino; Silva, André C.

doi:10.2139/ssrn.2635727

Cited by 5 publications

(3 citation statements)

References 71 publications

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“…The author observed that frequent monetary policy changes heighten uncertainties, which increases cash holding. Adao and Silva (2020) attribute the substantial increase in firm cash holdings from 1980 to 2017 in Europe to frequent changes in monetary policy and the effectiveness of interest rate channel due to increase in real interest rate.…”

Section: Review Of Related Literaturementioning

confidence: 99%

Effect of financial technology on cash holding in Nigeria

Onah

Ujunwa

et al. 2021

AJEMS

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PurposeThis paper aims to examine the effect of financial technology on cash holding in Nigeria.Design/methodology/approachThe authors use Pesaran et al.’s (2001) autoregressive distributed lag (ARDL) bounds test approach to cointegration to estimate the long-run relationship between four direct measures of financial technology (automated teller machine [ATM], Internet banking [IB], point of sale [POS] and mobile banking [MB]) and cash holding.FindingsThe authors find the presence of long-run negative relationship between cash holding and the four direct measures of financial technology.Practical implicationsDespite the negative effect of financial technology on cash holding, the descriptive results highlight increasing trajectory in cash holding. This suggests that structural factors such as ethical climate, literacy level, household characteristics, currency denomination structures, economic uncertainty and infrastructure deficit may account for the pervasive cash transactions in Nigeria and not necessarily the unwillingness of economic agents to use digital platform for financial transactions.Originality/valueThis study contributes to existing literature by augmenting the money demand function to accommodate direct measures of financial technology in examining the effectiveness of the policy on cash holding in Nigeria.

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Section: Review Of Related Literaturementioning

confidence: 99%

Effect of financial technology on cash holding in Nigeria

Onah

Ujunwa

et al. 2021

AJEMS

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“…Both European and U.S. companies have accumulated substantial cash reserves on their balance sheets. Corporate cash holdings corrected for inflation increased almost six times from 1980 to 2017, from 140 to 811 bn dollars (see Adao and Silva 2019). 1 Most recent data show that, for the main European countries (i.e., France, Germany, Italy and Spain) between 2007 and 2018, the aggregate nominal GDP and the stock of deposits held by non-financial firms increased by 16% and 90%, respectively.…”

Section: Introductionmentioning

confidence: 99%

Does too much liquidity generate instability?

Calcagnini

Gardini

Giombini

et al. 2020

J Econ Interact Coord

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Corporate demand for cash is related to a number of firm-specific characteristics, like the presence of transaction costs, information asymmetry in credit markets, uncertainty and risk aversion. The purpose of this paper is to build a dynamic model that describes the potential chaotic effects of the accumulation of cash by firms over a prolonged period of time. By exploring the theoretical connections between firm financial policies and investment decisions, we show that too much liquidity might generate economic instability. When firm increases the share of cash devoted to risky investment, and reduces the share of cash distributed to shareholders as dividends, the fixed point of the system changes from being stable to being unstable. Moreover, the impact of such a policy on the stability of the system is larger the greater the investment risk. The chaotic behavior is mainly observable in the dynamics of cash, which in turn may affect all investment decisions.

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“…1 This paper explores the relationship between firms' inflation expectations and their holdings of liquid assets. Curtis, Garin and Mehkari (2017) argue that the level of inflation is an important determinant of firm-level liquid asset holdings, and moreover, liquid asset holdings have increased in many countries in recent years (Adao and Silva, 2019). We expect that firms with higher shares of liquid assets should have more incentive to track and process information about inflation.…”

Section: Introductionmentioning

confidence: 96%

Firms’ asset holdings and inflation expectations

Kumar

2020

Journal of Economic Behavior & Organization

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This paper investigates the relationship between firms' inflation expectations and their holdings of liquid assets. We implement a new quantitative survey of firms' expectations about inflation in New Zealand. We find that firms that hold more shares of liquid assets systematically report lower inflation expectations. Moreover, we implement an experiment by providing firms new exogenous information about recent inflation dynamics. This experiment allows us to assess how firms respond to new information in terms of belief revisions and firm-level decisions.

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The Effect of Firm Cash Holdings on Monetary Policy

Cited by 5 publications

References 71 publications

Effect of financial technology on cash holding in Nigeria

Effect of financial technology on cash holding in Nigeria

Does too much liquidity generate instability?

Firms’ asset holdings and inflation expectations

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