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Macroeconomic uncertainty and corporate liquidity: the Indian case

Author

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  • Saumitra Bhaduri
  • Mrinal Kanti

Abstract

Interest in the uncertainties prevailing at the macroeconomic level has always been well known in economic literature. This article analyses the effect of firm level and macroeconomic uncertainty on the decisions of Indian firms with regard to their optimal cash holdings. Using a dynamic panel data model, the study finds strong support for the hypothesis that Indian firms increase their cash holdings with an increase in either form of uncertainty. Also, results for the sub-samples show that middle-aged and middle-sized firms are most affected by variations in macroeconomic uncertainty.

Suggested Citation

  • Saumitra Bhaduri & Mrinal Kanti, 2011. "Macroeconomic uncertainty and corporate liquidity: the Indian case," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 4(1), pages 167-180.
    • Handle: RePEc:taf:macfem:v:4:y:2011:i:1:p:167-180
    DOI: 10.1080/17520843.2011.548622
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    Cited by:

    1. Demir, Ender & Ersan, Oguz, 2017. "Economic policy uncertainty and cash holdings: Evidence from BRIC countries," Emerging Markets Review, Elsevier, vol. 33(C), pages 189-200.
    2. Shehub Bin Hasan & Md Samsul Alam & Sudharshan Reddy Paramati & Md Shahidul Islam, 2022. "Does firm-level political risk affect cash holdings?," Review of Quantitative Finance and Accounting, Springer, vol. 59(1), pages 311-337, July.
    3. Fang-Nan Liao & Xiao-Li Ji & Zhi-Ping Wang, 2019. "Firms’ Sustainability: Does Economic Policy Uncertainty Affect Internal Control?," Sustainability, MDPI, vol. 11(3), pages 1-26, February.
    4. Gupta, C.P. & Bedi, Prateek, 2020. "Corporate cash holdings and promoter ownership," Emerging Markets Review, Elsevier, vol. 44(C).
    5. Bijoy Chandra Das & Fakhrul Hasan & Soma Rani Sutradhar, 2024. "The impact of economic policy uncertainty and inflation risk on corporate cash holdings," Review of Quantitative Finance and Accounting, Springer, vol. 62(3), pages 865-887, April.
    6. Bugshan, Abdullah, 2022. "Oil price volatility and corporate cash holding," Journal of Commodity Markets, Elsevier, vol. 28(C).
    7. Yogesh Maheshwari & K.T. Vigneswara Rao, 2017. "Determinants of Corporate Cash Holdings," Global Business Review, International Management Institute, vol. 18(2), pages 416-427, April.
    8. Debabrata Datta & Babita Agarwal, 2014. "Corporate Investment Behaviour in India During 1998–2012," Paradigm, , vol. 18(1), pages 87-102, June.

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