Cash Holdings Research Articles

Judicial reform and corporate cash holdings: Evidence from the establishment of circuit courts in China

This paper studies the effect of judicial reform on corporate cash holdings. Leveraging the establishment of Circuit Courts in China as an exogenous shock, we demonstrate that firms reduce cash holdings by 10.4% when under the jurisdiction of a court. The two primary channels through which the courts affect cash holdings are the availability of cheaper external financing and lower litigation uncertainty. This effect is more pronounced in financially constrained, private, and non-politically connected firms. Moreover, the equivalent perceived value of one additional CNY of cash held by firms declines by ￥0.091 due to lower precautionary motives. Further analysis shows that firms are more likely to pursue returns from alternative strategies by investing more, raising more capital, and buying back more shares. Collectively, these results suggest that judicial independence can have potentially important consequences for corporate cash management strategies.

ESG and Leverage Adjustment: Based on Stakeholder Theory and Signaling Theory

Many of today's firms are suffering from leverage imbalance. A company's debt can negatively impact its performance when it deviates from its target leverage. Thus, this paper discusses adjusting the firm's capital structure to an optimal one. Combining stakeholder theory and signaling theory, this paper discusses how and under what circumstances ESG may have an impact on capital structure, from which the paper proposes the following conjectures: whether ESG can have a significant impact on a firm's target leverage; how ESG can affect a firm's capital structure when the firm has an asymmetry of information; and whether ESG can be tailored to economic environments that can have an impact on a firm's capital structure changes have an effect. After the inference of this paper, ESG can effectively influence firms' capital structure and accelerate the adjustment speed of firms' leverage to target leverage under the state of firms' information transparency. ESG will be more effective in regulating firms' target leverage in the downturn of the economic environment. The analytical framework of this paper may also be effectively applied to other research directions, such as corporate investment decisions, cash holdings, and dividend policies.

Strategic interactions and the sensitivity of cash savings to stock price

We examine how strategic interactions, i.e., strategic substitutes (SS) and strategic complements (SC), affect the sensitivity of cash savings to stock price. Using a panel data of U.S. firms over the 1997–2019 period, we show that cash savings are more sensitive to stock price among SS than SC and the intensity of rivals’ interactions in product market increases this sensitivity. These results are consistent with research showing that SS are more responsive to product market competition. We further show that R&D intensities and corporate hedging needs act as two channels through which strategic interactions affects cash holdings. First, R&D intensities increase the sensitivity of cash to stock price. This effect is more pronounced among SS, complementing researching showing stock market reacts more strongly to innovation by SS. Second, we report that hedging needs decrease the sensitivity of cash savings to stock price, especially for SC, consistent with the notion that using differentiated inputs increases hedging costs, hence, SC are more conservative in their liquidity management.

Debt dispersion and corporate liquidity

AbstractCash holdings are significantly lower for firms with dispersed debt maturity, and this finding is robust to entropy balancing and allowing for the simultaneous selection of dispersion and cash holdings. The relation is strongest for firms with shorter debt maturity and firms that rely on precautionary cash, such as financially constrained firms and firms with volatile cash flows. Markets place a lower value on the cash of firms with high or increasing dispersion, and these firms retain less cash. Collectively, the evidence implies that firms can hedge rollover risk with dispersed debt maturity as an alternative to holding costly cash.

Uncertainty, precautionary saving, and investment: Evidence from prescheduled election cycles

AbstractWe show empirically that firms increase cash holdings starting as early as one year before prescheduled (i.e., predictable) elections. Then, for four quarters around elections when uncertainty and external financing costs are high, firms decrease investment and draw down saved cash balances to avoid tapping external financing. We use a dynamic model of firm investment and saving to demonstrate the importance of anticipation of future financing costs to firms' pre‐election precautionary saving behavior. Theoretically, if election uncertainty were only to affect potential investment, lower firm investment would result in higher contemporaneous cash balances, which is inconsistent with our empirical results.

Working Capital Management and Bank Mergers

This study investigates the consequences of bank mergers on non-financial borrowers’ working capital management. We find evidence that bank mergers increase corporate cash holdings and decrease receivables and investments in inventories by reducing bank credit availability. Bank mergers also decrease trade credit used through the reduction in bank credit availability. These findings are new contributions to the literature, suggesting that borrowing firms find it more difficult to manage working capital after bank mergers occur and that bank-dependent firms find it more difficult to manage working capital than their non-dependent counterparts after mergers.

Financial Constraints, Investment, and Liquidity: Evidence from Russian Companies

ABSTRACT This paper estimates the degree of financial constraints faced by Russian publicly traded companies using the two most common approaches in the literature. We find that both Russian company investment and cash holdings are sensitive to cash flows, suggesting that the average sample firm is financially constrained. State-owned companies appear less financially constrained. After 2014, when economic sanctions restricted access to foreign capital, Russian companies became more financially constrained and more dependent on accumulated cash reserves. Overall, our findings highlight the importance of financial constraints in the context of developing countries.

Strengthening Corporate Cash Holdings and Investment Efficiency in the COVID-19 Pandemic: Some Empirical Evidence from Indonesia Emerging Markets

This study explores the connection between the amount of cash a company holds and its effectiveness in making investments, as well as the effect of the COVID-19 pandemic. The researchers analyzed a dataset consisting of 2721 observations from Indonesian publicly listed firms between 2013 and 2020, excluding the financial industry (SIC 6). They utilized multiple linear regression analysis to investigate how cash holding influences investment efficiency and how the COVID-19 pandemic affects this relationship. The research approach employed was quantitative. The results indicate that a higher cash holding has a negative impact on investment efficiency. The uncertainty caused by the COVID-19 outbreak has significantly affected corporate cash flows, impeding business activities. Additionally, robustness tests were conducted to address concerns regarding potential bias, and the results consistently aligned with the ordinary least squares (OLS) estimation. These findings are significant for investors, potential investors, and management, providing insights into the interplay among cash holding, investment efficiency, and the COVID-19 Pandemic.

The Influence of Corporate Liquidity, Networking Capital on Cash Holdings in Iraqi Islamic Banks

The Influence of Corporate Liquidity, Networking Capital on Cash Holdings in Iraqi Islamic Banks

Female political leaders and R&D investment

This study employs a difference-in-differences method to analyse how female political leaders affect corporate R&D investment. Our findings indicate that female political leaders exert a positive influence on R&D investments. Moreover, these positive effects are more pronounced among high-tech firms and those operating in developed economies, although they appear to be less significant for defence firms. Additionally, we demonstrate that the presence of female leaders correlates with a reduced rate of inventor emigration to other economies, suggesting that female leadership may contribute to the retention of skilled inventors. Consistent with these primary results, firms exhibit a decrease in R&D investment following the departure of female political leaders from office. Furthermore, during the tenure of female leaders, firms also tend to reduce their cash holdings. We explore potential channels and observe that female leadership results in less external conflict and thus promote R&D investment.

Pengaruh Cash Holding, Keputusan Investasi dan Struktur Modal terhadap Nilai Perusahaan dengan Komite Audit sebagai Variabel Moderasi

This research aims to determine the influence of Cash Holding, Investment Decisions and Capital Structure on Firm Value with the Audit Committee as a Moderating Variable. The measurements used for each variabel are firm value using Tobin's Q, cash holding using CH, investment decisions using the TAG proxy, capital structure using the DER proxy, and audit committees using measurements using the number of audit committee meetings in the company. The population in this research are companies in the Consumer Non-Cyclical sektor in 2020-2022 which are listed on the Indonesia Stock Exchange (IDX). The data used is secondary data with a sampling technique using the purposive sampling method. Based on this method, there are 89 companies in the population out of 112 companies that meet the criteria. The samples were taken over a three year annual financial reporting period so that in total there were 210 samples. The analytical method used in the research is multiple linear regression analysis. The results of the analysis show that investment decisions have a positive effect on firm value. Meanwhile, cash holding and capital structure have no effect on firm value. The audit committee as a moderating variable is able to strengthen the influence of cash holding and investment decisions on firm value. However, the audit committee was unable to weaken the influence of capital structure on firm value. Keywords: Audit Committee, Capital Structure, Cash Holding, Firm Value, Investment Decisions.

How did the COVID-19 pandemic affect Corporate Cash Holdings Determinants? An Applied Study on Saudi Arabia Firms

The COVID-19 pandemic has introduced substantial uncertainty and economic disruptions, prompting numerous firms to increase their cash reserves as a significant advantage to enable effective management of exogenous shocks. Using a sample of 120 non-financial firms listed on the Saudi Stock Exchange between 2012 and 2022, we examine the determinants of cash holdings. By dividing the sample into two sub-periods: pre-Covid and under Covid and applying the panel data approach, the results show a significant difference between the determinants of cash holdings of the two groups of firms. During the COVID-19 pandemic, cash holding has increased with firm size, cash flow, Cost of Capital, and net working capital, while it has decreased with dividend payment, and return on invested capital. The research provides support for the pecking order theory, indicating that Saudi firms have maintained relatively stable cash management policies and remained unaffected throughout the pandemic. This study sheds light on the supportive role of the Saudi government in assisting firms facing liquidity challenges, offering a comprehensive understanding of the subject. Furthermore, it contributes to the existing literature on corporate finance by exploring new factors that drive cash management decisions.

Pengaruh Siklus Hidup Perusahaan, Board Size, Sales Growth, Dividend Payment dan Research and Development Expenditure terhadap Cash Holding

This research aims to analyze the influence of the company's life cycle, board size, sales growth, dividend payment, and research and development expenditure on cash holding. The data used in this study are secondary data sourced from the annual reports of manufacturing companies listed on the Indonesia Stock Exchange for the period 2018-2022. The research sample was selected using purposive sampling, resulting in 25 companies as samples. The data analysis method used for hypothesis testing is multiple linear regression using SPSS software. The research results indicate that the Company's Life Cycle has a positive influence on Cash Holding, while Board Size, Sales Growth, Dividend Payment, and Research and Development Expenditure have a negative influence on Cash Holding. This research is expected to be considered by management and investors to pay attention to the company's life cycle, board size, sales growth, dividend payment, and research and development in order to maintain cash holding stability and minimize losses. Keywords: Board Size, Cash Holding, Company Life Cycle, Dividend Payment, Research And Development Expenditure, Sales Growth.

Web‐based corporate social responsibility disclosure practices: A systematic literature review and research directions

AbstractThe current paper aims to conduct a comprehensive systematic review of the existing literature on web‐based Corporate Social Responsibility (CSR) disclosure practices and introduce suggestions for scholars in this research area. To achieve this main objective, a systematic literature review technique was adopted, consisting of the content analysis of 119 papers from different scientific databases utilizing specific inclusion and exclusion criteria. The findings of the study show that scholars have a strong and continuing interest in a variety of web‐based Corporate Social Responsibility disclosure (CSRD) aspects. Moreover, the investigation revealed that stakeholder, legitimacy, institutional, and Media‐Richness theories were more prevalent in the online CSRD literature. According to the investigation, the two key determinants of online CSRD are firm‐ and country‐level characteristics. The results further confirm that content analysis is the most common research methodology. Furthermore, the bulk of online CSRD studies are from Spain, Malaysia, and the United States. Moreover, findings indicate that samples of 91 up to 200 entities from listed companies from multiple industries and banks are the most common sample sizes and sectors. The review suggests that there is a gap in the use of mixed methodological studies. The current work has some limitations. In more detail, this study limited the search to reviewing 119 papers published in English peer‐reviewed journals that focused on web‐based CSR disclosure practices until February 2023, so there might be other academic studies accidentally missed. Future studies will require a mixed methodological approach, including quantitative (e.g., document analysis) and qualitative research methods (i.e., interviews and case studies), to examine, for example, the determinants (e.g., corporate governance mechanisms, cultural dimensions, ESG performance scores, and prosperity status like country governance, investment environment) and consequences (i.e., corporate cash holdings, credit ratings) of web‐based CSR disclosure in various sectors such as the banking sector, Universities, SMEs, and MNCs. The study reveals a strong interest in web‐based CSR aspects, emphasizing its significance in fostering societal relationships among businesses and their stakeholders. Furthermore, the study suggests that professional bodies, regulators, and policymakers should establish effective standards for CSRD on websites to ensure the quality, quantity, and type of information available. The originality of this paper derives from its being one of the first papers to date that analyses comprehensively and systematically all the articles related to internet CSR disclosure practices and brings out interesting directions for future research.

Liquidity Management in Pakistani Firms: An Empirical Analysis

This study investigates the factors affecting corporate cash holdings among Pakistani firms, utilizing a comprehensive analysis through multiple regression models, including OLS, fixed effects, and Fama-MacBeth methodologies. The results consistently demonstrate significant relationships between cash held by companies and various factors that are specific to firms such as market-to-book ratio, firm size, leverage, cash flow from operations, net-working capital, long-term investments, and cash flow variations. Key findings indicate that companies having greater growth potential maintain higher amount of cash, supporting the trade-off theory, while larger firms hold less cash, reflecting their better access to external financing. The negative association between borrowing and cash-holdings aligns with the pecking-order theory, and the positive association between capital expenditures and cash held by companies supports the precautionary motive. This study makes the contribution to the current research on corporate finance by providing evidence on the liquidity management practices of firms in a developing economy context, offering insights that are particularly relevant for policymakers, financial managers, and investors. The robustness of the results across different models underscores the reliability of the findings, enhancing the understanding of how various factors influence corporate cash holdings.

Determinants of Cash Holdings in State-Owned Enterprises Listed on the Indonesia Stock Exchange during the Period 2015–2021

This research was conducted to empirically investigate the determinants affecting the cash holdings of state-owned enterprises in Indonesia. The sample consisted of 15 state-owned companies listed on the Indonesia Stock Exchange (IDX) over a 7-year period (2015-2021). The study employed the ordinary least squares (OLS) research model. The results of this research indicate that leverage and BI rate significantly affects the cash holdings of state-owned enterprises in Indonesia. However, cash flow volatility, and capital expenditure do not have a significant impact on cash holdings. This study contributes to the literature on the determinants of cash holdings in state-owned enterprises in Indonesia.

The Effect Of Corporate Governance On Cash Holdings

The Effect Of Corporate Governance On Cash Holdings

Deleveraging, Debt Default Risk, and Enterprise Innovation: Evidence from China

This study, at the micro level, takes the Chinese central government's implementation of the "deleveraging" policy as a quasi natural experiment. Based on data from listed companies from 2013 to 2017, this study introduces the Metron default distance that balances financial indicators and asset value fluctuations to measure default risk. Therefore, the DID method is used to test the innovation situation of enterprises with high default risk under the "deleveraging" policy. Research has found that companies with significant default risks under policy shocks have significantly improved their innovation levels and increased their innovation achievements. Furthermore, this research studies the mechanism of the "deleveraging" policy on enterprise innovation from three perspectives: enterprise financing, investment, and business management. The implementation of the "deleveraging" policy will enhance the cash holdings and management governance level of enterprises with high default risk, thereby promoting enterprise innovation.

EFFECT OF TOTAL ASSET TURNOVER, CASH FLOW, GCG, PROFITABILITY AGAINST FINANCIAL DISTRESS CASH HOLDING AS MODERATION

This research aims to determine the influence of Total Asset Turnover, Cash Flow, Good Corporate Governance, and Profitability through Cash Holding as Moderation on Financial Distress. The research time period was during 2018 – 2022. The population of this study included manufacturing companies listed on the Indonesia Stock Exchange in 2018 - 2022. The sampling technique employed purposive sampling technique. Based on the criteria, 24 company samples were obtained. The type of data used secondary data obtained from the official website of the Indonesia Stock Exchange. The data analysis method used panel data regression analysis. The results revealed that Total Asset Turnover and Good Corporate Governance partially had an influence on financial distress, Cash Flow and Profitability partially had no influence on financial distress, Cash Holding partially had no influence on financial distress. Cash Holding which moderates Total Asset Turnover and Good Corporate Governance shows results that it can strengthen the correlation to financial distress. Meanwhile, Cash Holding moderating Cash Flow and Profitability cannot strengthen the correlation to Financial Distress.Keywords: Total Asset Turnover, Cash Flow, Good Corporate Governance, Profitability, Cash Holding, Financial Distress.

Corporate cash holding and firm’s performance in times of Ukraine war: a literature review and way forward

Corporate cash holding and firm’s performance in times of Ukraine war: a literature review and way forward