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.
target cash holdings, partial adjustment model, adjustment speed
MSc in Finance
Corporate Finance | Portfolio and Security Analysis
The Adjustment Speed of Corporate Cash Holdings. (2010). Dissertations and Theses Collection (SMU Access Only).
Available at: http://ink.library.smu.edu.sg/etd_coll_smu/6
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