Effects of macroeconomic conditions on corporate liquidity-international evidence Academic Article uri icon


  • The study investigates the effects of macroeconomic conditions on corporate liquidity (cash holdings) in 34 countries from 1994 to 2005. The results show that macroeconomic variables like GDP growth, inflation, real short-term interest rate, government budget deficit, credit spread, private credit, and corporate tax rate have a direct impact on corporate cash holdings. In addition, the study reveals that macro variables have an indirect impact on corporate cash holdings because the effects of firm-specific variables on corporate liquidity can be influenced by macroeconomic conditions. Our study broadens the extant liquidity literature by establishing the role of macro variables, aside from the traditional firm-specific variables, as important determinants of corporate liquidity. EuroJournals Publishing, Inc. 2010.

published proceedings

  • International Research Journal of Finance and Economics

author list (cited authors)

  • Chen, N., & Mahajan, A.

complete list of authors

  • Chen, N||Mahajan, A

publication date

  • January 2010