Cash is King: Speed of Adjustment in Latin American Firms’ Cash Holdings During the COVID-19 Pandemic

This study investigates the speed of cash holdings adjustments in Latin American firms during the tumultuous COVID-19 pandemic. By examining firm-specific details, industry characteristics, and the overarching economic climate, we uncover the intriguing patterns of cash reserve management. Our results show that Latin American firms displayed a swift agility to adjust their cash reserves, with an adjustment speed of 54.9%, compared with the average speed of 31% observed in firms in the developed world. Moreover, during the pandemic’s peak in 2020 and 2021, this speed surged to 62.5%. However, we observe that multinational corporations in the region lagged, showing slower cash adjustment speeds than firms with only local operations during the COVID-19 pandemic.