Cultural and macroeconomic determinants of cash holdings management

Abstract

This study examines patterns in cash management, particularly cash holdings speed of adjustment (CH-SOA), across 48 countries. I find that managerial cultural characteristics and country-level macroeconomic factors influence the persistence of cash reserve levels, deviation from target, and the speed with which firms in different countries adjust their cash holdings. The findings support the idea that agency costs as well as market frictions influence CH-SOA and other aspects of cash management. The findings are robust to the inclusion of a wide range of firm-level characteristics, country-level corporate-governance variables, and an alternative cultural index.