Accordingly, all of the regressions control for fundamental credit risk variables based on Merton's (1974) structural model (firm size, asset volatility, and leverage), additional firm characteristics that could be related with spreads (profitability,
cash ratio, and tangibility), bond characteristics (coupon rate, maturity, issue amount, seniority ranking, and trading volume), and macroeconomic variables (risk-free rate, ten year to two year Treasury spread and three-month LIBOR-Treasury spread).
This period is characterized by the gradual decrease of
cash ratio, measured by cash and cash equivalent to total assets, from 2011 to 2016 (*).
The average liquidity ratios (current ratio X8, quick ratio X9,
cash ratio X10) for industrial companies were very high.
These councils considered the 100% liquidity ratio and 20%
cash ratio as sufficient (http://www.bilgaz.net/dosyalar/OranAnalizi.pdf).
We follow Fresard (2010), adopting Z-scored cash holdings to measure cash level of a company, more specifically, ZCash, is the annual cash holding ratio minus the mean of industry-year
cash ratio based on all companies within the industry and divide standard deviation of industry-year level of cash holdings, also can be referred as relative-to-industry cash.
Also the
cash ratio of the industry is not much stronger as the industry has to pay high debt to its suppliers.
where [CR.sup.i] is the
Cash Ratio Difference for sponsor i, [CR.sup.j] is the
Cash Ratio for peer firm j, and I is the number of peer firms for firm i.
There are considered the following liquidity ratios: current ratio, quick ratio, and
cash ratio, as well as the following solvency ratios: general solvency ratio, and patrimonial solvency ratio.
Both aggregate technology and liquidity shocks can justify the negative comovement between employment and the corporate
cash ratio. During the financial crisis, the negative comovement between cash and employment was notable.
Bates found a positive association between his
cash ratio (cash divided by total assets) and a market-to-book variable.