The Effects of Industry-Level Uncertainty on Cash Holdings: The Case of Germany

Arbeitspapier

This paper investigates the link between the optimal level of non-financial firms' liquid assets and industry-level uncertainty. We develop a structural model of a firm's value maximization problem that predicts that as industry-level uncertainty increases the firm will increase its optimal level of liquidity. We test this hypothesis using a panel of German firms drawn from the Bundesbank's balance sheet database and show that greater uncertainty at the industry level causes firms to increase their cash holdings. The strength of these effects differ among subsamples of the firms with different characteristics.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: DIW Discussion Papers ; No. 638

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Transactional Relationships; Contracts and Reputation; Networks ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Thema: Uncertainty ; cash holdings ; liquidity ; non-financial firms ; Betriebliche Liquidität ; Unternehmenswert ; Verarbeitendes Gewerbe ; Schätzung ; Deutschland

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Baum, Christopher F. ; Schäfer, Dorothea ; Talavera, Oleksandr
• Ereignis: Veröffentlichung
• (wer): Deutsches Institut für Wirtschaftsforschung (DIW)
• (wo): Berlin
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/18531
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ