How optimal cash changed by the global financial crisis? A multi-country analysis
DOI:
https://doi.org/10.17811/ebl.9.2.2020.114-123Abstract
This article investigates the impact of the global financial crisis 2007-2009 (GFC) as well as financial constraints and governance on optimal cash decisions. Using 14,885 sample firms from eleven countries, empirical results show that constrained firms have a faster cash adjustment than unconstrained firms as confirmed by precautionary motive. Contrary to agency motive, firms in weak-governed countries have a slower cash adjustment than those in well-governed countries before the GFC. However, this picture changes after the GFC. Specifically, they increase their cash adjustments, whereas those in well-governed countries decrease their cash adjustments as supported by agency motive. Overall, optimal cash policy differs following the GFC across financial constraints and governance.
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