Cash Holding and Firm Value in the Presence of Managerial Optimism

Habib, Ashfaq; Bhatti, M. Ishaq; Khan, Muhammad Asif; Azam, Zafar

doi:10.3390/jrfm14080356

Cited by 9 publications

(14 citation statements)

References 79 publications

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“…However, the results of this study are not in line with Habib et al (2021), who proved that cash holding has a negative effect on firm value in a constrained firm, Ameer (2012) discovered that cash holdings negatively affect the firm value for closely held firms., which explained that Cash Holding does not affect the value company. This is due to the level of cash availability owned and controlled by financial managers because companies tend to use cash to meet all needs.…”

Section: The Role Of Cash Holding On Firm Valuecontrasting

confidence: 91%

“…The first hypothesis was accepted or proven so changes in the increase or decrease in cash holdings are able to affect the value of a company. These results are in line with Habib et al (2021) proved that cash holding positively affects firm value in an unconstrained firm. Ameer (2012), Minh HA &Minh TAİ (2017), andChandra &Feliana (2020) also found that cash holding positively affects firm value.…”

Section: The Role Of Cash Holding On Firm Valuesupporting

confidence: 91%

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Determinant Factors of Firm Value: Cash Holdings and Dividend Policy as Mediation

Yudhyani

Kulsum

Reza

et al. 2022

jasf

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In times of uncertainty such as a crisis, a company needs to maintain its value for its investors. Theory suggests that for uncertainty, the company needs to have cash holding, but on the other hand, it needs to pay dividends. Therefore, this research aims to prove the relationship between factors that affect firm value with cash holding and dividend policy as mediation. We conduct this research on the manufacturing company from 2015 to 2021 registered on Indonesia Stock Exchange. Using the purposive sampling method, 82 company was chosen and 574 data was studied. To test our hypotheses, we use SmartPLS. The results proved that cash holding can influence firm value, while dividend policy cannot. For the indirect effect, we found that profitability and net working capital indirectly affect firm value through cash holding. We explain the theory and practical implications and describe our study’s limitations. For future research, we suggest differentiating firm value before and during a financial crisis, and the industry sector that has the worst, moderate, and light impact from the crisis.

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Section: The Role Of Cash Holding On Firm Valuecontrasting

confidence: 91%

Section: The Role Of Cash Holding On Firm Valuesupporting

confidence: 91%

Determinant Factors of Firm Value: Cash Holdings and Dividend Policy as Mediation

Yudhyani

Kulsum

Reza

et al. 2022

jasf

View full text Add to dashboard Cite

show abstract

“…Previous studies have demonstrated that a conflict of interest negatively affects the price share and high levels of cash holding may result in being exposed to agency problems through a manager's exploitation of cash resources to achieve personal benefits at the expense of negative reflection on stock returns, which results in higher agency costs and lower investment efficiency, and then a negative reflection on stock returns (Ferreira & Vilela, 2004;Mun et al, 2020;Habib et al, 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

The impact of cash holding on stock returns in small and medium enterprises on the Egyptian Nile Stock Exchange

Rashed

Ghoniem

2022

Investment Management and Financial Innovations

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This paper explores the impact of cash holdings on stock returns in small and medium enterprises. The sample includes 24 SMEs listed on the Egyptian Nile Exchange, excluding service firms, with a total of 96 observations from 2016 to 2019. Data was collected from financial statements and reports obtained through an information dissemination company in Egypt. This study uses a panel data analysis with comparing all results via ordinary least squares and the generalized method of moments. The findings show a statistically significant negative effect of cash holding on stock returns in small and medium enterprises on the Egyptian Nile Exchange. Further, the evidence shows that firms with higher levels of cash holding have higher investment alternatives and then lower stock returns. This result supports the agency theory that an increase in cash holding leads to managers exploiting cash resources to achieve personal benefits, thus increasing agency costs, lowering investment efficiency, and therefore lowering stock returns. The results support the trade-off between risk and return by using cash holding to finance operational activities and investing in higher investment alternatives and then lower stock returns.

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“…Furthermore, cash holdings can help avoid financial distress in difficult times. Cash reserves help firms cope with higher costs of financing, or economic hardship (Habib et al 2021). Thus, retaining cash can act as a precaution (Boot, Vladimirov 2019).…”

Section: The Effect Of Cash Holdings On Financial Performancementioning

confidence: 99%

The Effect of Cash Holdings on Financial Performance in German and Dutch Multinationals

POST¹

2022

CEREM

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Aim: A global rise in inflation has sparked a renewed interest in the matter of cash holding decisions in firms. Increasing inflation makes for different cash holding practices, but the effect of cash holdings on firm performance remains unclear. This study aims to determine what the effect of higher cash holdings is on financial performance in German and Dutch multinational corporations (MNCs) Design / Research methods: The sample consists of 105 MNCs, 69 of which are from Germany, while 36 firms are Dutch. Through a standard OLS regression, financial performance, measured in return on assets, is regressed on cash holdings, measured in a cash-to-assets ratio. Conclusions / findings: A negative relationship is found between cash holdings and financial performance. This is because agency costs are more considerable when pools of cash become larger. Moreover, the relationship is significantly negative in the German subsample, but not in the Dutch subsample. This could be explained by differences in masculinity in national culture. Originality / value of the article: The effect of cash holdings on firm performance has been neglected in the literature. By focusing on two similar countries, and introducing national culture into the discussion of cash management, the study is valuable to both management and literature. Limitations: Research design is rather limited. Findings are preliminary, and need to be verified through the use of more extensive studies. JEL: G30

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Cash Holding and Firm Value in the Presence of Managerial Optimism

Cited by 9 publications

References 79 publications

Determinant Factors of Firm Value: Cash Holdings and Dividend Policy as Mediation

Determinant Factors of Firm Value: Cash Holdings and Dividend Policy as Mediation

The impact of cash holding on stock returns in small and medium enterprises on the Egyptian Nile Stock Exchange

The Effect of Cash Holdings on Financial Performance in German and Dutch Multinationals

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