Financial Crisis and Corporate Liquidity: Implications for Emerging Markets

The present study investigates corporate liquidity (cash holdings) in emerging markets from 1990 to 2006. During the Asian financial crisis, firms in the majority of emerging markets examined in the present study held more cash. In addition, such an increase in cash holdings was the result of the strengthened propensity of firms to retain cash from earnings. The firms also hoarded cash to take advantage of greater growth opportunities and to meet higher investment demands after the crisis. Furthermore, the results indicated that cash added to firm value. The end of the crisis guaranteed the value-enhancing effect of cash for the majority of the economies in the current study.