Abstract
PurposeThis study investigates the factors affecting corporate cash holdings for a sample of 598 Indian Micro, small and medium-sized enterprises (MSMEs) for nine years (2011–2020).Design/methodology/approachThe system generalized method of moments (GMM) approach is used to examine the determinants of cash holdings in the Indian MSME context.FindingsThe article shows liquidity, cash flow, leverage, firm size, probability of financial distress and cash flow volatility significant in explaining cash holding decisions for MSMEs in India. No evidence of firm age and growth opportunities as determinants of cash holdings in Indian MSMEs has been found. In addition, strong evidence of cash flow volatility, cash flow and liquidity in differentiating the cash holding decisions in the service and manufacturing industry has been documented.Originality/valueWhile earlier research has addressed this problem in developed nations, this is the first study that fulfills the need to investigate the variables that influence MSMEs' cash holding decisions in a developing economy like India.
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