Table 5. Cross-sectional heterogeneity...

Table 5.

Cross-sectional heterogeneity II: is it about risk?

Dependent variable	Cash		CashToNetAssets		Cash		CashToNetAssets
Sample	FFF	Non-FFF	FFF	Non-FFF	FFF	Non-FFF	FFF	Non-FFF
Volatility variable	Sales				Cash flow
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
LMR	0.004 (1.67)	–0.002 (−0.97)	–0.001 (−0.11)	–0.007 (−1.24)	0.005** (2.16)	–0.002 (−1.08)	–0.000 (−0.04)	–0.008 (−1.34)
LMR#volatility	0.015*** (5.37)	–0.006*** (−5.77)	0.042*** (6.30)	–0.018*** (−4.91)	0.040*** (5.80)	–0.010*** (−2.95)	0.157*** (6.30)	–0.031*** (−3.50)
Volatility	–0.058*** (−5.31)	0.031*** (9.43)	–0.140*** (−4.55)	0.093*** (7.97)	–0.142*** (−4.14)	0.057** (2.88)	–0.584*** (−3.06)	0.183*** (3.35)
Size $_{(t - 1)}$	0.005 (0.82)	–0.029*** (−5.59)	0.045* (1.84)	–0.057** (−2.44)	0.005 (0.83)	–0.030*** (−5.57)	0.044 (1.58)	–0.061** (−2.43)
Growth $_{(t - 1)}$	–0.003 (−1.13)	0.005*** (4.67)	–0.016 (−1.32)	0.026*** (4.07)	–0.003 (−1.13)	0.005*** (4.77)	–0.017 (−1.27)	0.026*** (3.96)
Leverage $_{(t - 1)}$	–0.107*** (−4.91)	–0.079*** (−10.31)	–0.267*** (−3.22)	–0.195*** (−4.69)	–0.104*** (−4.84)	–0.081*** (−9.94)	–0.259*** (−3.09)	–0.202*** (−4.70)
NWC $_{(t - 1)}$	–0.047* (−2.07)	–0.038* (−1.80)	–0.125** (−2.14)	–0.133* (−2.05)	–0.048* (−2.03)	–0.040* (−1.91)	–0.135* (−2.11)	–0.140** (−2.14)
Investments $_{(t - 1)}$	–0.062** (−2.28)	–0.049*** (−3.07)	–0.209** (−2.63)	–0.099* (−1.99)	–0.059** (−2.28)	–0.049*** (−3.00)	–0.201** (−2.61)	–0.100* (−1.97)
Dividends $_{(t - 1)}$	0.003 (0.74)	0.007*** (3.39)	0.000 (0.05)	0.013** (2.31)	0.003 (0.97)	0.007*** (3.21)	0.001 (0.18)	0.013** (2.23)
Cash flow $_{(t - 1)}$	0.035* (1.84)	0.008 (0.75)	0.100 (1.44)	–0.025 (−0.56)	0.047** (2.26)	0.007 (0.63)	0.131 (1.70)	–0.027 (−0.62)
Other ultimate owner		0.002 (0.54)		0.008 (0.70)		0.002 (0.46)		0.008 (0.66)
Inflation $_{(t - 1)}$	–0.213 (−0.84)	–0.090 (−1.07)	–0.053 (−0.07)	0.059 (0.20)	–0.250 (−0.95)	–0.093 (−1.09)	–0.165 (−0.21)	0.050 (0.17)
GDP growth $_{(t - 1)}$	–0.030 (−0.42)	–0.042 (−1.01)	0.059 (0.15)	–0.103 (−0.68)	–0.044 (−0.58)	–0.045 (−1.08)	0.024 (0.06)	–0.111 (−0.75)
ln(GDP p.c.) $_{(t - 1)}$	0.050 (0.81)	0.087*** (3.15)	–0.003 (−0.01)	0.067 (0.64)	0.057 (0.89)	0.088*** (3.20)	0.023 (0.08)	0.067 (0.66)
Firm fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry-Year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Country specific year trend	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Clustered standard errors	Country-level	Country-level	Country-level	Country-level	Country-level	Country-level	Country-level	Country-level
Observations	6,085	21,248	6,085	21,248	6,050	21,158	6,050	21,158
$R_{a d j}^{2}$	0.110	0.072	0.088	0.053	0.110	0.071	0.090	0.052

Dependent variable	Cash		CashToNetAssets		Cash		CashToNetAssets
Sample	FFF	Non-FFF	FFF	Non-FFF	FFF	Non-FFF	FFF	Non-FFF
Volatility variable	Sales				Cash flow
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
LMR	0.004 (1.67)	–0.002 (−0.97)	–0.001 (−0.11)	–0.007 (−1.24)	0.005** (2.16)	–0.002 (−1.08)	–0.000 (−0.04)	–0.008 (−1.34)
LMR#volatility	0.015*** (5.37)	–0.006*** (−5.77)	0.042*** (6.30)	–0.018*** (−4.91)	0.040*** (5.80)	–0.010*** (−2.95)	0.157*** (6.30)	–0.031*** (−3.50)
Volatility	–0.058*** (−5.31)	0.031*** (9.43)	–0.140*** (−4.55)	0.093*** (7.97)	–0.142*** (−4.14)	0.057** (2.88)	–0.584*** (−3.06)	0.183*** (3.35)
Size $_{(t - 1)}$	0.005 (0.82)	–0.029*** (−5.59)	0.045* (1.84)	–0.057** (−2.44)	0.005 (0.83)	–0.030*** (−5.57)	0.044 (1.58)	–0.061** (−2.43)
Growth $_{(t - 1)}$	–0.003 (−1.13)	0.005*** (4.67)	–0.016 (−1.32)	0.026*** (4.07)	–0.003 (−1.13)	0.005*** (4.77)	–0.017 (−1.27)	0.026*** (3.96)
Leverage $_{(t - 1)}$	–0.107*** (−4.91)	–0.079*** (−10.31)	–0.267*** (−3.22)	–0.195*** (−4.69)	–0.104*** (−4.84)	–0.081*** (−9.94)	–0.259*** (−3.09)	–0.202*** (−4.70)
NWC $_{(t - 1)}$	–0.047* (−2.07)	–0.038* (−1.80)	–0.125** (−2.14)	–0.133* (−2.05)	–0.048* (−2.03)	–0.040* (−1.91)	–0.135* (−2.11)	–0.140** (−2.14)
Investments $_{(t - 1)}$	–0.062** (−2.28)	–0.049*** (−3.07)	–0.209** (−2.63)	–0.099* (−1.99)	–0.059** (−2.28)	–0.049*** (−3.00)	–0.201** (−2.61)	–0.100* (−1.97)
Dividends $_{(t - 1)}$	0.003 (0.74)	0.007*** (3.39)	0.000 (0.05)	0.013** (2.31)	0.003 (0.97)	0.007*** (3.21)	0.001 (0.18)	0.013** (2.23)
Cash flow $_{(t - 1)}$	0.035* (1.84)	0.008 (0.75)	0.100 (1.44)	–0.025 (−0.56)	0.047** (2.26)	0.007 (0.63)	0.131 (1.70)	–0.027 (−0.62)
Other ultimate owner		0.002 (0.54)		0.008 (0.70)		0.002 (0.46)		0.008 (0.66)
Inflation $_{(t - 1)}$	–0.213 (−0.84)	–0.090 (−1.07)	–0.053 (−0.07)	0.059 (0.20)	–0.250 (−0.95)	–0.093 (−1.09)	–0.165 (−0.21)	0.050 (0.17)
GDP growth $_{(t - 1)}$	–0.030 (−0.42)	–0.042 (−1.01)	0.059 (0.15)	–0.103 (−0.68)	–0.044 (−0.58)	–0.045 (−1.08)	0.024 (0.06)	–0.111 (−0.75)
ln(GDP p.c.) $_{(t - 1)}$	0.050 (0.81)	0.087*** (3.15)	–0.003 (−0.01)	0.067 (0.64)	0.057 (0.89)	0.088*** (3.20)	0.023 (0.08)	0.067 (0.66)
Firm fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry-Year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Country specific year trend	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Clustered standard errors	Country-level	Country-level	Country-level	Country-level	Country-level	Country-level	Country-level	Country-level
Observations	6,085	21,248	6,085	21,248	6,050	21,158	6,050	21,158
$R_{a d j}^{2}$	0.110	0.072	0.088	0.053	0.110	0.071	0.090	0.052

Note(s):

This table presents the results of OLS regression of firm risk-related differential effect of LMR on cash holdings for subsamples based on the FFF status. We measure firm risk in terms of sales volatility (Columns 1–4) and cash flow volatility (Columns 5–8). We calculate sales (cash flow) volatility as the standard deviation of sales (cash flow), deflated by total assets, in the previous five years, with at least three out of five available firm-year-observations. Column 1 and 2, 5 and 6 (3 and 4, 7 and 8) show the results for Cash (CashToNetAssets) as dependent variable. All variables are defined in Table A1 in the Appendix. All independent variables except LMR, Volatility, and Other Ultimate Owner are lagged by one period. All regression specifications include firm fixed effects, industry-year fixed effects, and country specific year trends. The t-Statistics in parentheses are based on robust standard errors, clustered at the country level. *, **, *** denote statistical significance at the 10, 5, and 1% levels, respectively

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