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The adjustment speed of corporate cash holdings

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thesis
posted on 13.05.2020 by Yi Xu

The current literature provides some empirical evidences about whether firms have target ratios of cash holdings. In my thesis, I employ a partial-adjustment model with panel data of Compustat Industrial Annual tapes during 1974 to 2006. I find evidence supportive of target corporate cash ratios. A typical firm closes each year over 50% of the gap between the actual target cash ratios and its long-run target. My results also indicate that the adjustment speed of cash holdings increases if firm sizes are smaller, firms are more financially constrained or firms have more growth opportunities.

History

Document type

Master thesis

Degree awarded

MSc in Finance

Year degree awarded

2010

Supervisor(s)

Wang Rong

SMU School

Lee Kong Chian School of Business

No. of pages

45

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