What determines cash holdings at privately held and publicly traded firms? Evidence from 20 emerging markets

Hall, Thomas W.; Mateus, Cesário; Mateus, Irina B.

doi:10.1016/j.irfa.2013.11.002

Cited by 49 publications

(39 citation statements)

References 26 publications

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“…Gao et al (2013) shows that despite facing higher financial constraints, private firms hold about half as much cash as public firms and they attribute the difference to the relatively higher agency problems in the latter group of firms. Similar inferences on the importance of financial constraints in cash policies of private firms are presented by Bigelli and Sanchez-Vidal (2012) in Italy and in an international context by Hall et al (2014). Opler et al (1999) assume that firms face a trade-off between the costs associated with foregone investment opportunities due to lack of capital market access and the costs associated with the liquidity premium of holding cash or cash 6 Kling et al (2014) extend the analysis of Ozkan and Ozkan (2004) on UK-listed firms to include potential alternatives to cash, including trade credit and short-term debt.…”

Section: Determinants Of Firms' Demand For Cashsupporting

confidence: 68%

Corporate cash holdings: Causes and consequences

Amess

Banerji

Lampousis

2015

International Review of Financial Analysis

127

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The considerable growth in corporate cash holdings around the world has prompted scholarly interest. Consequently, there is now a large academic literature examining cash holdings and their impact on corporate outcomes and firm values. This article reviews and synthesizes the literature to offer insight into two primary motives to hold cash: precautionary and agency. We first present a stylized model that explores the trade-off in holding cash between these two motives and then examine empirical studies to determine how existing theories are supported by evidence using data from a variety of countries. In addition, we examine the effectiveness of a variety of corporate governance devices in curtailing cash holdings and also the extent to which these devices offer investors' confidence that cash will not be wasted. Finally, we discuss methodological and measurement issues associated with empirical cash holdings studies. JEL classification: G30; G32

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Section: Determinants Of Firms' Demand For Cashsupporting

confidence: 68%

Corporate cash holdings: Causes and consequences

Amess

Banerji

Lampousis

2015

International Review of Financial Analysis

127

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“…A research study conducted by Hall, Mateus and Mateus (2014), which also included a sample of companies from the Republic of Serbia, has analysed the differences in the levels of cash holdings between public and private companies, as well as differences in the levels of cash holdings between companies operating in developed markets and those operating in developing markets. This study has provided evidence on the determinants of cash holdings for companies from different sectors, expanding the knowledge about cash holdings among companies in the Republic of Serbia.…”

Section: Literature Reviewmentioning

confidence: 99%

Analysis of the determinants of corporate cash holdings: Examples from companies in Serbia

Račić¹,

Stanišić²

2017

Eur J Appl Econ

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Abstract:In this study, we aimed to analyse the empirical determinants of cash holdings on the sample of non-financial companies operating in the Republic of Serbia. For that purpose, dynamic panel data models were estimated by utilising the generalised method of moments for the period from 2008 to 2013. The econometric analysis indicates that companies with higher cash flow hold more cash in their assets. Larger companies as well as companies with more liquid assets and higher turnover coefficients tend to reduce their cash levels. According to the results, companies operating in the Republic of Serbia tend to hold the optimal level of cash and prefer internal sources of financing, which is in line with the principles of trade-off theory and pecking order theory.

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“…Researchers have discovered a wide variety of variables with a considerable influence on cash holdings. Company-specific factors with a significant effect on the cash level include, among others, a short-term debt to the total of assets ratio, short-term liabilities to assets, return on assets, firm size, working capital to assets ratio (Hall et al, 2014), market value to book value and R&D/Sales (Wasiuzzaman, 2014), risk (cash flow volatility), and effective tax rate (Bigelli & Sanchez-Vidal, 2012).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Subramaniam et al (2011) concluded that diversified companies hold significantly less cash than their focused counterparts, which they explained by the availability of the internal capital market. Hall et al (2014) showed that in Central and Eastern Europe, companies in more marketoriented economies (based on EBRD transition indicators) held more cash than those in other countries. They also found that privately owned firms tend to carry more money than public ones.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Inflation and Operating Cycle on the Corporate Cash Holdings in South-East Europe

Naumoski

Juhász

2018

Manage: J. Sustainable Bus. Manage, Solutions Emerging Econ.

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Determining optimal cash holding is one of the most crucial issues in the corporate financial management aiming to maximise the shareholder value. The optimum of corporate cash amount is not only dependent on many company-specific factors, but it is also associated with both the corporate governance structure and the institutional and macroeconomic environment. Earlier research papers showed that at the macro level, companies adjust their cash holdings to the changes in the level of the inflation and, at the micro level, to the changes of the operating cycle linked to the turnover of the corporate cash flow. This paper investigates the determinants of corporate cash holdings for a sample of 868 firms from ten South-East European countries (Bosnia and Herzegovina, Bulgaria, Montenegro, Croatia, Greece, Romania, Macedonia, Slovenia, Serbia and Turkey). More specifically, we investigate the influence of the inflation and the corporate operating cycle on the corporate cash holdings. Using company financial data and the country CPI for the period 2006-2015, we apply a balanced panel regression model involving the yearly change of the cash ratio as a dependent variable, and country CPI, operating cycle and other firm-specific control variables as explanatory variables. Results confirm that both the inflation rate and the operating cycle have substantial influence on the change of the corporate cash holdings also in the region. The relationship of the change in cash and the inflation is non-linear and best described by a U-shaped curve. That means that corporate cash holdings decrease as the level of inflation increases to a critical point but beyond that, the cash holdings start to increase. At the same time, we identified a straight linear relationship between the change in cash holdings and the length of the operating cycle. Also, we found that the change in the corporate cash holdings is positively related to the size of the company, the operating cash flow and the capital expenditures. In addition, it is inversely associated with both the change of the net working capital and the change of short and long-term debt.

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What determines cash holdings at privately held and publicly traded firms? Evidence from 20 emerging markets

Cited by 49 publications

References 26 publications

Corporate cash holdings: Causes and consequences

Corporate cash holdings: Causes and consequences

Analysis of the determinants of corporate cash holdings: Examples from companies in Serbia

The Impact of Inflation and Operating Cycle on the Corporate Cash Holdings in South-East Europe

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