Macroeconomic Environment and the Level of Cash Holding: A Literature Review

Abstract

The level of corporate cash holding is mainly affected by micro factors. In the past 20 years, the relationship between the level of cash holding and macroeconomic environmental factors has attracted more and more attention. This paper first briefly discusses three traditional theories of the level of cash holding, and proposes the leading role of trade-off theory and pecking order theory in this topic. Then, it sorts the relevant literature on macroeconomic fluctuations and macroeconomic policies.