Cash and speed of adjustment
| PreCOVID | COVID | PreCOVID | COVID | |||||
|---|---|---|---|---|---|---|---|---|
| LowCash | HighCash | LowCash | HighCash | LowCash | HighCash | LowCash | HighCash | |
| Variable | ΔBook lev | ΔMarket lev | ||||||
| Panel A Full sample | ||||||||
| Book Dev | 0.010* | 0.103*** | 0.074*** | 0.084*** | ||||
| (0.006) | (0.009) | (0.006) | (0.009) | |||||
| Market Dev | 0.316*** | 0.057*** | 0.298*** | 0.030*** | ||||
| (0.012) | (0.008) | (0.010) | (0.006) | |||||
| Constant | 0.015*** | −0.070*** | −0.009*** | −0.056*** | −0.060*** | −0.013*** | −0.109*** | −0.015*** |
| (0.001) | (0.007) | (0.001) | (0.006) | (0.003) | (0.003) | (0.003) | (0.002) | |
| Observations | 9,244 | 3,353 | 7,776 | 3,483 | 9,244 | 3,353 | 7,776 | 3,483 |
| R-squared | 0.264 | 0.329 | 0.230 | 0.282 | 0.389 | 0.263 | 0.366 | 0.303 |
| Firm FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Qtr FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Panel B Low 20 (Rank 1) This group represent the least 20% valued firms | ||||||||
| Book Dev | 0.007 | 0.100*** | 0.042*** | 0.046*** | ||||
| (0.014) | (0.016) | (0.013) | (0.015) | |||||
| Market Dev | 0.197*** | 0.497*** | 0.112*** | 0.479*** | ||||
| (0.020) | (0.027) | (0.018) | (0.031) | |||||
| Constant | 0.029*** | −0.030*** | 0.020** | −0.014*** | −0.030*** | 0.107*** | −0.026*** | 0.038*** |
| (0.008) | (0.005) | (0.008) | (0.003) | (0.004) | (0.004) | (0.004) | (0.003) | |
| Observations | 1,936 | 1,058 | 1,294 | 997 | 1,936 | 1,058 | 1,294 | 997 |
| R-squared | 0.248 | 0.386 | 0.274 | 0.292 | 0.443 | 0.364 | 0.442 | 0.360 |
| Firm FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Qtr FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Panel C Top 20 (Rank 5) This group represents the top 20% most valued firms | ||||||||
| Book Dev | −0.002 | 0.055** | 0.071*** | 0.150*** | ||||
| (0.011) | (0.028) | (0.010) | (0.027) | |||||
| Market Dev | 0.057*** | −0.026*** | 0.127*** | −0.028*** | ||||
| (0.020) | (0.010) | (0.016) | (0.006) | |||||
| Constant | 0.009 | −0.078* | −0.052*** | −0.207*** | −0.028** | 0.015*** | −0.090*** | 0.010*** |
| (0.008) | (0.043) | (0.007) | (0.038) | (0.013) | (0.005) | (0.010) | (0.003) | |
| Observations | 1,952 | 419 | 2,053 | 545 | 1,952 | 419 | 2,053 | 545 |
| R-squared | 0.284 | 0.337 | 0.201 | 0.342 | 0.325 | 0.285 | 0.314 | 0.271 |
| Firm FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Qtr FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| PreCOVID | COVID | PreCOVID | COVID | |||||
|---|---|---|---|---|---|---|---|---|
| LowCash | HighCash | LowCash | HighCash | LowCash | HighCash | LowCash | HighCash | |
| Variable | ΔBook lev | ΔMarket lev | ||||||
| Book Dev | 0.010* | 0.103*** | 0.074*** | 0.084*** | ||||
| (0.006) | (0.009) | (0.006) | (0.009) | |||||
| Market Dev | 0.316*** | 0.057*** | 0.298*** | 0.030*** | ||||
| (0.012) | (0.008) | (0.010) | (0.006) | |||||
| Constant | 0.015*** | −0.070*** | −0.009*** | −0.056*** | −0.060*** | −0.013*** | −0.109*** | −0.015*** |
| (0.001) | (0.007) | (0.001) | (0.006) | (0.003) | (0.003) | (0.003) | (0.002) | |
| Observations | 9,244 | 3,353 | 7,776 | 3,483 | 9,244 | 3,353 | 7,776 | 3,483 |
| R-squared | 0.264 | 0.329 | 0.230 | 0.282 | 0.389 | 0.263 | 0.366 | 0.303 |
| Firm FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Qtr FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Book Dev | 0.007 | 0.100*** | 0.042*** | 0.046*** | ||||
| (0.014) | (0.016) | (0.013) | (0.015) | |||||
| Market Dev | 0.197*** | 0.497*** | 0.112*** | 0.479*** | ||||
| (0.020) | (0.027) | (0.018) | (0.031) | |||||
| Constant | 0.029*** | −0.030*** | 0.020** | −0.014*** | −0.030*** | 0.107*** | −0.026*** | 0.038*** |
| (0.008) | (0.005) | (0.008) | (0.003) | (0.004) | (0.004) | (0.004) | (0.003) | |
| Observations | 1,936 | 1,058 | 1,294 | 997 | 1,936 | 1,058 | 1,294 | 997 |
| R-squared | 0.248 | 0.386 | 0.274 | 0.292 | 0.443 | 0.364 | 0.442 | 0.360 |
| Firm FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Qtr FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Book Dev | −0.002 | 0.055** | 0.071*** | 0.150*** | ||||
| (0.011) | (0.028) | (0.010) | (0.027) | |||||
| Market Dev | 0.057*** | −0.026*** | 0.127*** | −0.028*** | ||||
| (0.020) | (0.010) | (0.016) | (0.006) | |||||
| Constant | 0.009 | −0.078* | −0.052*** | −0.207*** | −0.028** | 0.015*** | −0.090*** | 0.010*** |
| (0.008) | (0.043) | (0.007) | (0.038) | (0.013) | (0.005) | (0.010) | (0.003) | |
| Observations | 1,952 | 419 | 2,053 | 545 | 1,952 | 419 | 2,053 | 545 |
| R-squared | 0.284 | 0.337 | 0.201 | 0.342 | 0.325 | 0.285 | 0.314 | 0.271 |
| Firm FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
| Qtr FE | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Note(s): Table 6 presents the impact of the cash holdings on the speed of adjustment. LowCash firm is defined as having non-positive net debt equals to 0, otherwise the firm is classified as HighCash. Non-positive net debt (NPND) (Strebulaev & Yang, 2013) is a dummy variable measured as follows: if firms with the sum of long-term debt plus debt in current liabilities less cash and short-term investment equal to or less than 0 than the firm is identified as high cash firm, otherwise it is defined as low cash firm. In Panel A, report finding for the full sample. In Panel B and C report the findings for least 20% valued firms and top 20% valued firms, respectively
Pre-COVID and COVID samples range between 2018Q3-2020Q1 and 2020Q2-2021Q4 respectively
Robust standard errors are presented in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1 signifies significance at 1%, 5%, and 10% respectively
Source(s): Table by authors
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