The Determinants of Corporate Liquidity in the Netherlands

29 Pages Posted: 23 Feb 2002

See all articles by Allard Bruinshoofd

Allard Bruinshoofd

Maastricht University - Department of Economics

Clemens J.M. Kool

Utrecht University - School of Economics

Date Written: February 14, 2002

Abstract

We investigate the driving forces of corporate liquidity for a balanced panel of large Dutch non-financial firms during the period 1986-1997. We hypothesize that corporate liquidity targets exist and follow from static trade-off arguments. In the short run, however, liquidity may respond passively to current developments as well, producing liquidity dynamics in line with buffer stock behaviour. We therefore estimate corporate liquidity holdings in an error correction framework and find that liquidity targets are relevant and firms make efforts to converge towards these targets even in the short run. Short run dynamics, however, are in line with buffer stock predictions.

Keywords: Corporate liquidity demand, precautionary liquidity, static trade-off

JEL Classification: G3, E41

Suggested Citation

Bruinshoofd, Allard and Kool, Clemens J.M., The Determinants of Corporate Liquidity in the Netherlands (February 14, 2002). Maastricht University Economics Working Paper; EFA 2002 Berlin Meetings Discussion Paper. Available at SSRN: https://ssrn.com/abstract=300698 or http://dx.doi.org/10.2139/ssrn.300698

Allard Bruinshoofd (Contact Author)

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+43 388 26 85 (Phone)
+43 388 48 64 (Fax)

Clemens J.M. Kool

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

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