scholarly journals Determinants of Corporate Cash Holdings: Evidence from MNCs in Pakistan

2018 ◽  
Vol 4 (1) ◽  
pp. 71-78
Author(s):  
Nadeem Ahmed Sheikh ◽  
Khawaja Khalid Mehmood ◽  
Mujtaba Kamal
Keyword(s):  
Fixed Effects ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Cash Flows ◽  
Ordinary Least Squares ◽  
Capital Expenditures ◽  
Cash Holding ◽  
Working Capital ◽  
Growth Opportunities ◽  
Corporate Cash Holdings

The purpose of this article is to investigate whether firm-specific variables (i.e. size, growth opportunities, profitability, capital expenditures, leverage, dividends, cash flow and working capital) affect the cash holdings of MNCs. Moreover, to investigate whether theories relevant to cash holdings provide any justification to narrate the cash holding behavior of listed MNCs on Pakistan Stock Exchange (PSX) for the period 2006-2016. Results indicate that profitability positively impacts cash holdings. Firm size positively impacts cash holdings in pooled Ordinary Least Squares, while it negatively impacts cash holdings in the fixed effects method; however the relationship is insignificant. Leverage, growth opportunities, dividends, working capital ratio and capital expenditures are significant and negatively related to corporate cash holdings. Finally, cash flows are unrelated to cash holdings. In short, results indicate that firm-specific variables significantly affect the cash holdings of MNCs. Moreover, (+/-) coefficients of different explanatory variables indicate that theories relevant to cash holdings provide some support to explain the cash holding behavior of MNCs in an emerging economy - Pakistan.

Managerial optimism and corporate cash holdings

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ly Thi Hai Tran ◽  
Thoa Thi Kim Tu ◽  
Thao Thi Phuong Hoang
Keyword(s):  
Fixed Effects ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Annual Reports ◽  
Cash Holding ◽  
Growth Opportunities ◽  
Content Type ◽  
Managerial Optimism ◽  
Linguistic Tone ◽  
Corporate Cash Holdings

PurposeThis paper examines the effects of managerial optimism on corporate cash holdings.Design/methodology/approachThe authors construct a novel measure of managerial optimism based on the linguistic tone of annual reports by applying a Naïve Bayesian Machine Learning algorithm to non-numeric parts of Vietnamese listed firms' reports from 2010 to 2016. The paper employs firm and year fixed effects model and also uses the generalized method of moments estimation as robustness checks.FindingsThe authors find that the cash holding of firms managed by optimistic managers is higher than the cash holdings of firms managed by non-optimistic managers. Managerial optimism also influences corporate cash holdings through internal cash flows and the current year’s capital expenditures. Although the authors find no evidence that optimistic managers hold more cash to finance future growth opportunities in general, optimistic managers hold more cash for near future investment opportunities than non-optimistic managers do.Research limitations/implicationsThe novel measure proposed in this study is expected to provide great potential for future finance studies investigating the relation between managerial traits and corporate policies since it is applicable for any levels of financial market development. In addition, the findings highlight the important role, both direct and indirect, of managerial optimism on cash holdings. Related future research should take this psychological trait into account to gain a better understanding of corporate cash holding.Originality/valueThis paper helps to extend the literature on managerial optimism measurement by introducing a new measure of managerial optimism based on the linguistic tone of annual reports. Furthermore, this is among the first studies directly linking annual report linguistic tone to cash holding. The paper also provides new evidence regarding how managerial optimism affects the relationship between the firm's growth opportunities and cash holding, given that mispricing corrections are naturally uncertain.

Determinants of Corporate Cash Holdings

2017 ◽  
Vol 18 (2) ◽  
pp. 416-427 ◽  
Author(s):  
Yogesh Maheshwari ◽  
K.T. Vigneswara Rao
Keyword(s):  
Panel Data ◽  
Fixed Effects ◽  
Capital Expenditure ◽  
Cash Holdings ◽  
Working Capital ◽  
Financial Policies ◽  
Panel Data Regression ◽  
Strong Positive Relationship ◽  
Development Expenditure ◽  
Corporate Cash Holdings

This article aims at examining the financial determinants of corporate cash holdings. The study employs panel data regression method. It uses the fixed-effects method based on Hausman test results for the estimation of panel data model. This study has implications that are beneficial for the business managers to have a better understanding and appreciation of the role and importance of the determinants of corporate cash holdings in formulating and evaluating the corporate financial policies. The results of the study indicate a strong positive relationship between cash holdings and cash flow, dividend payment, market-to-book ratio, net debt issuance and net equity issuance of the sample firms. It is also found that the cash holdings of these firms are negatively affected by net working capital, leverage, research and development expenditure as well as capital expenditure of the firm. The article will help researchers as well as managers to understand as to what motivates the firms to hold cash, given the fact that despite being often termed as a non-earning asset, firms generally hold more cash than their normal working capital requirement.

Does Shariah compliance affect corporate cash holdings and cash adjustment dynamics? Evidence from Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Gaafar Abdalkrim
Keyword(s):  
Positive Impact ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Cash Flows ◽  
Least Square ◽  
Cash Holding ◽  
External Financing ◽  
Content Type ◽  
Listed Firms ◽  
Corporate Cash Holdings

Purpose The purpose of this paper is to investigate the effect of Shariah compliance status on corporate cash holding decision. Design/methodology/approach This study applies ordinary least square and generalized method of moments regression models for a sample of 178 Malaysian listed firms over the period 2008–2017. Findings The results show that Shariah compliance has positive impact on the level of cash reserves of firms. It is also found that Shariah-compliant (SC) firms quickly adjust their level of cash holdings toward a target level than non–Shariah-compliant (NSC) firms. These results can be explained by the restrictions imposed by Shariah rules on firms to sustain their compliance status. Further, the results reveal that SC firms are likely to hold more cash out of their cash flows. This is the expected result, as the firms operating within the ambit of Shariah rulings and regulations face external financing constraints. Practical implications This study has important implications for managers, policymakers and regulators. For managers, the study is an important reference to understand and design cash management policies by considering restrictions imposed by Shariah regulations. In particular, managers should pay more attention to periods of credit crunch and weak economic conditions in which SC firms may be exposed to greater bankruptcy risks. For policymakers and regulators, this study may be useful in assessing the effect of the restrictions imposed by Shariah law on firm’s cash holding decision. Therefore, in an effort to increase the supply of external financing available to SC firms, policymakers should encourage the issuing of Islamic financial products. Originality/value This paper focuses on SC firms where financial constraints are bound to be more stringent than for NSC firms. It explores the implications of relevant Islamic principles on corporate cash holdings.

Cash and Financial Constraints: An Empirical Analysis of Non-Financial Firms Listed in Indonesian Stock Exchange 2005-2014

2016 ◽  
Vol 1 (1) ◽  
Author(s):  
Sigit S. Wibowo ◽  
Stefany Lolyta
Keyword(s):  
Financial Constraints ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Cash Flows ◽  
Cash Holding ◽  
External Financing ◽  
Dividend Payment ◽  
Public Firms ◽  
Financial Firms ◽  
Strong Motivation

This study examines corporate motives to hold cash and its equivalents as forms of financing, by using non-financial public firms listed in Indonesian Stock Exchange (IDX) between 2005 and 2014. Three criteria are employed to distinguish constrained and non-constrained firms namely: KZ index, dividend payment, and firm size. Based on the results of PLS, this study finds that the amount of cash holding is increasing along with the increase of cash flows. This result is consistent for both firm categories based on the previous criteria. However, based on the 2SLS method, cash flow does not affect the cash holdings of the firms with financial constraints. The result of this research shows that firms with financial constraints have strong motivation to hold cash due to lack of access to external financing.

scholarly journals Using Analytical Hierarchy Process Methods in Cash Holding and Corporate Working Capital Management: an Asian Perspective

2019 ◽  
Vol 1 and 2 (1 and 2) ◽  
pp. 01-15
Author(s):  
Jeffrey Edward Jarrett ◽  
Xia Pan ◽  
Wenjun Du
Keyword(s):  
Environmental Factors ◽  
Financial Management ◽  
Process Management ◽  
Cash Holdings ◽  
Financial Behavior ◽  
Cash Holding ◽  
Capital Management ◽  
Working Capital ◽  
Working Capital Management ◽  
Corporate Cash Holdings

Cash holding behavior is an important financial behavior of the company, which reflects the company's financial strategy and management strategy. What are the factors that affect corporate cash holdings? How does the change in these factors affect the change in corporate cash holdings? Starting from two aspects of national macroeconomic environmental factors and microeconomic environmental factors, this paper tries to analyze these factors and how they affect corporate cash holdings. Working Capital Management is an important part of the company's financial management, which is closely related to the value creation of the company. What is the content of working capital management? How to manage the working capital effectively? This paper expounds the contents of working capital management from the perspective of process management, and expounds how to effectively manage working capital from the perspective of situational management. To link these two areas ids the goal of this study.

Expansionary monetary policy and corporate investment in an emerging market

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Quoc Trung Tran
Keyword(s):  
Monetary Policy ◽  
Money Supply ◽  
Fixed Effects ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Corporate Investment ◽  
Ordinary Least Squares ◽  
Cash Holding ◽  
Content Type

Purpose The purpose of this paper is to investigate the effect of monetary loosening on corporate investment in an emerging market. Design/methodology/approach The paper begins this study by using a dynamic model to investigate the effect of monetary loosening on corporate investment. This paper uses money supply growth as a proxy for monetary loosening, as the State Bank of Vietnam relies mainly on a quantity-based policy. Next, this paper continues to analyze whether cash holdings are able to mitigate this effect. Finally, this paper examines the effect of monetary loosening on investment smoothing and the mitigating role of cash holding. The research sample includes 4,868 from 617 firms. This paper uses different regression techniques (i.e. pooled ordinary least squares clustered by firm, fixed effects, random effects and system generalized method of moments). Findings The research findings show that money supply growth is positively related to both corporate investment and investment smoothing. The effect of monetary loosening on corporate investment is mitigated by corporate cash holding. Moreover, this paper finds that the mitigating effect of cash holdings is stronger for financially constrained firms and non-state-owned enterprises. Originality/value Prior studies only focus on corporate investment under-tightening monetary policy; however, there is no research on firm investment under monetary loosening in an emerging market.

Corporate Cash Holdings: An Empirical Investigation of Indian Companies

2019 ◽  
Vol 20 (4) ◽  
pp. 1088-1106 ◽  
Author(s):  
Ravinder Kumar Arora
Keyword(s):  
Cash Holdings ◽  
Cash Flows ◽  
Cash Holding ◽  
Developed Markets ◽  
Tangible Assets ◽  
Hierarchy Model ◽  
Cash Flow Volatility ◽  
Excess Cash ◽  
The Government ◽  
Corporate Cash Holdings

The article examines the pattern of cash holdings of 266 Indian companies comprised in the S&P BSE 500 index for the period 2005–2015 to understand the factors that influence the level of cash balances, to estimate the amount of excess cash held by these companies and to analyse how these companies spend their excess cash. The sample companies hold approximately 12 per cent of their total assets as cash in 2015. The pattern of cash holdings of the sample companies is supported by the static trade-off and the financing hierarchy model. Consistent with earlier evidence, firms with large cash balances have strong growth opportunities, larger cash flows, higher cash flow volatility, higher leverage, higher level of promoter holding and belong to the government-owned sector. Companies that have more liquid assets other than cash have more tangible assets and pay more to their shareholders hold lower cash balances. However, contrary to earlier evidence, size of the firm is not related to the amount of cash holding. Further, firms with large cash balances have higher leverage. The study does not find association of cash holding with many other variables found to have association with cash holding in developed markets. A large number of the firms in the sample hold cash in excess of what is predicted on the basis of firm’s characteristics. These companies manage their cash balances in a manner that is not consistent with maximization of shareholders’ wealth.

scholarly journals Cash Management in Hospitality Sector of Western Europe

2020 ◽  
Vol 12 (2) ◽  
pp. 109-128
Author(s):  
Wisal Ahmad ◽  
Shahwali Khan ◽  
Mohammad Sohail Yunis
Keyword(s):  
Cash Flow ◽  
Western Europe ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Cash Flows ◽  
Capital Expenditures ◽  
Trade Off ◽  
Dividend Payments ◽  
Hospitality Sector ◽  
Cash Flow Volatility

The study investigates the effect of factors explaining the cash holdings of hospitality sector in five countries of Western Europe, namely, France, Germany, Spain, Italy and United Kingdom for a period of 12 years (2005-2016). The effect of parameters i.e., size, leverage, capital expenditures, growth opportunities, liquidity, cash flow, asset intangibility, cash flow volatility, dividend payments and stock exchange on cash holdings has been empirically tested by employing dynamic estimation methodology i.e., Generalized Method of Moments (GMM). The findings reveal that growth opportunities and dividend payments have a positive effect on cash holdings, while size, leverage, liquidity, cash flow, asset intangibility, cash flow volatility and stock exchange pose a negative effect. Moreover, the subsectors such as airlines, gambling and restaurants and bars are holding more cash in comparison to the travel and tourism. The study empirically supports the trade-off, pecking order and free cash flow theories of cash holdings for the hospitality sector. The academic implications of the study reflect that larger companies in the hospitality sector of Western Europe are more diversified and hence amass more cash. Similarly, supporting the cash flow theory, larger hospitality sector companies hold more cash to bar the agency issues. Moreover, companies in the hospitality sector keep less cash as such companies face close monitoring and attain leverage cheaply. Supporting the trade off theory, companies in the hospitality sector hold considerable fund of cash to counter cash shortages for making investments. Furthermore, companies in the hospitality sector experiencing more cash flows keep less cash, as influx of cash flows serve as a source of liquidity. Furthermore, to be able to pay stable dividends, the hospitality sector companies amass more cash and hence support the trade off theory. The practical implications of the study shows that by utilizing the empirical findings in this study, an investor sensitive to empire-building traits of managers for their private benefits, can infer that large hospitality companies with more leverage and capital expenditures will hold less cash. However, holding excessive cash in such companies can create agency problems. On the other hand, large hospitality companies holding more cash would have an ease in practicing debt financing as holding more cash is an indication of diversification and expansion, making shareholders more heedful about their net earnings.

scholarly journals Sectoral Analysis of Factors Influencing Dividend Policy: Case of an Emerging Financial Market

2019 ◽  
Vol 12 (3) ◽  
pp. 110 ◽  
Author(s):  
Geetanjali Pinto ◽  
Shailesh Rastogi
Keyword(s):  
Fixed Effects ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Cash Flows ◽  
Ordinary Least Squares ◽  
Free Cash Flow ◽  
Dividend Policies ◽  
Explanatory Factors ◽  
Industrial Sectors ◽  
Free Cash Flow Hypothesis

This study aims to determine whether a firm’s dividends are influenced by the sector to which it belongs. This paper also examines the explanatory factors for dividends across individual sectors in India. This longitudinal study uses balanced data consisting of companies listed on the National Stock Exchange (NSE) of India for 12 years—from 2006 to 2017. Pooled ordinary least squares (POLSs) and fixed effects panel models are used in our estimation. We find that size, profitability, and interest coverage ratios have a significant positive relation to dividend policy. Furthermore, business risk and debt reveal a significantly negative relation with dividends. The findings on profitability support the free cash flow hypothesis for India. However, we also found that Indian companies prefer to follow a stable dividend policy. As a result of this, even firms with higher growth opportunities and lower cash flows continue to pay dividends. We also find evidence that dividend policies vary significantly across industrial sectors in India. The results of this study can be used by financial managers and policymakers in order to make appropriate dividend decisions. They can also help investors make portfolio selection decisions based on sectoral dividend paying behavior.

scholarly journals Faktor- Faktor Yang Mempengaruhi Cash Holding

2020 ◽  
Vol 12 (1) ◽  
pp. 25-41
Author(s):  
Fany Resti Fauzie ◽  
Anita Wijayanti ◽  
Purnama Siddi
Keyword(s):  
Data Analysis ◽  
Cash Flow ◽  
Financial Management ◽  
Capital Expenditure ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Sampling Technique ◽  
Cash Holding ◽  
Manufacturing Companies ◽  
Working Capital

Increasing business competition pushes company to optimize financial management properly, especially on cash. Efforts should be made to manage cash by knowing the factors that affect the cash that must be owned by the company so that the use of cash can be utilized optimally. This study aims to determine the effect of Cash Flow, Capital Expenditure, Net Working Capital and Leverage on Cash Holding in Food and Beverage sub-sector manufacturing companies listed on the Indonesia Stock Exchange for the period 2015-2018. The sampling technique using purposive sampling, so as to obtain a sample of 44. Data analysis technique used in this study is multiple linear regression using SPSS version 22. Based on the results of data analysis conducted shows that there is an influence of Cash Flow, Net Working Capital, Leverage Cash Holdings, while Capital Expenditure does not affect Cash Holdings. The benefits of this research are as a consideration for management in making decisions related to the factors that influence Cash Holding, as well as a consideration for investors if they want to invest in a company Keywordsi: Cash Holding, Cash Flow, Capital Expenditure, Leverage, Net Working Capital

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