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Liquidity Preference of Large Manufacturing Corporations (1921-1939)

Econometrica 1945 13(4), 334
THE purpose of this paper is to explain changes in cash balances held by large manufacturing corporations over the two decades preceding World War II. The analysis is based upon data for a sample covering 45 large manufacturing corporations in 11 industries developed by the Financial Research Program of the National Bureau of Economic Research. Although the corporations included in the sample are few in number they are responsible for a great part of all business sales and they own a great part of all business assets. Many of them are among the largest concerns in the country; each has total assets of $10 million or over.2 Cash balances of corporations are considered as consisting of two components, (a) transaction money and (b) free money.3 In the present analysis the choice of factors causing fluctuations in each of these components is based on theoretical grounds.