Corporate Liquidity and NBER Recession Announcements

Journal of Financial Research, Forthcoming

59 Pages Posted: 9 Jul 2019

See all articles by Anna-Leigh Stone

Anna-Leigh Stone

Samford University

Benton E. Gup

University of Alabama - Culverhouse College of Commerce & Business Administration

Date Written: June 26, 2019

Abstract

Using announcement memos released by the National Bureau of Economic Research (NBER), we show that corporations increase liquidity during the quarter the NBER announces a peak in the business cycle. This reaction is primarily restricted to memos about peaks in the business cycle, whether it is a preliminary announcement or an official confirmation. Federal Open Market Committee and other monetary policy news, real-time data releases, and tightening credit conditions do not drive the increase. This finding adds to the precautionary cash holdings literature by suggesting that corporations adjust liquidity not necessarily before recessions, but upon confirmation of a recession.

Keywords: cash holdings, recessions, precautionary motive

JEL Classification: G01, G30, G32

Suggested Citation

Stone, Anna-Leigh and Gup, Benton E., Corporate Liquidity and NBER Recession Announcements (June 26, 2019). Journal of Financial Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3415617

Anna-Leigh Stone (Contact Author)

Samford University ( email )

800 Lakeshore Drive
Birmingham, AL 35229
United States

Benton E. Gup

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

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