The joint determinants of cash holdings and debt maturity: the case for financial constraints

2016 ◽  
Vol 48 (3) ◽  
pp. 597-641 ◽  
Author(s):  
Ivan E. Brick ◽  
Rose C. Liao
Keyword(s):  
Financial Constraints ◽  
Cash Holdings ◽  
Debt Maturity

scholarly journals Asymmetric targeting of corporate cash holdings and financial constraints in Pakistani firms

2019 ◽  
Vol 26 (1) ◽  
pp. 76-97
Author(s):  
Ghulam Ayehsa Siddiqua ◽  
Ajid ur Rehman ◽  
Shahzad Hussain
Keyword(s):  
High Speed ◽  
Financial Constraints ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Optimal Level ◽  
Dynamic Panel Data ◽  
Asymmetric Adjustment ◽  
Content Type ◽  
Listed Firms ◽  
Target Firms

Purpose The purpose of this paper is to investigate the asymmetric adjustment of cash holdings in Pakistani firms for above and below target firms. Design/methodology/approach The study employs generalized method of moments (GMM) to investigate the adjustment of cash holdings. Findings The study found that the firms which hold cash above the optimal level of cash holdings have higher speed of adjustment than the firms which hold cash below the optimal level. Financially constrained (FC) firms also adjust their cash holdings faster than financially unconstrained (FUC) firms but high speed of downward adjustment does not remain persistent after financial constraints are controlled. Findings of this study reveal this asymmetric adjustment in above and below target firms and extend these results in FC and FUC Pakistani listed firms, respectively. Research limitations/implications The conclusion of this study has been derived under certain limitations. There is a vast space to extend this study in different dimensions. Firms operating in capital-intensive industries may provide different results for financial constraints because their policy designing would be quite different from other firms. Originality/value This study contributes to cash holdings research in Pakistan by exploring the adjustment behavior of cash holdings across Pakistani non-financial firms using econometric modeling. Downward adjustment rate is supposed to be higher than upward adjustment rate and this rate is tested using dynamic panel data model. Similarly, it is inferred that this relationship holds for above target firms even after including the financial constraints in the presented model.

scholarly journals Pengaruh Kepemilikan Asing , Leverage, Cash Holdings Dan Debt Maturity Terhadap Kinerja Keuangan Perusahaan

2020 ◽  
Vol 2 (3) ◽  
pp. 2893-2911
Author(s):  
Murti Sari Dewi ◽  
Erly Mulyani
Keyword(s):  
Real Estate ◽  
Financial Performance ◽  
Sampling Method ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Secondary Data ◽  
Foreign Ownership ◽  
Debt Maturity ◽  
Panel Regression ◽  
Cash Holding

This study aims to examine the effect of foreign ownership, leverage, cash holding and debt maturity on financial performance in property and real estate companies listed on the Indonesia stock exchange (idx) in the period 2014-2018. This study is categorized as causative research. The population in this study are property and real estate companies listed on the Indonesia stock exchange (idx) in the period 2014-2018. By using purposive sampling method, there were 24 companies as the research’s sample. The type of data used is secondary data and used is panel regression analysis. The results of this study indicate that foreign ownership, cash holding and debt maturity has no significant effect on financial performance, only leverage has significant effect on financial performance

Accruals quality, financial constraints, and corporate cash holdings

2019 ◽  
Vol 45 (8) ◽  
pp. 1129-1145 ◽  
Author(s):  
Hatem Mansali ◽  
Imen Derouiche ◽  
Karima Jemai
Keyword(s):  
Information Asymmetry ◽  
Financial Constraints ◽  
Earnings Quality ◽  
Cash Holdings ◽  
Reporting Quality ◽  
Discretionary Accruals ◽  
Content Type ◽  
Accruals Quality ◽  
Corporate Cash Holdings ◽  
High Information

Purpose The purpose of this paper is to examine how information asymmetry driven by earnings quality affects corporate cash holdings. It also investigates the role that financial constraints play in this effect. Design/methodology/approach The paper examines a large sample of 6,501 observations of 741 firms listed on Euronext Paris over the period 2000–2015. Earnings quality is computed using the Jones model performance-matched discretionary accruals developed by Kothari et al. (2005): the larger the absolute value of discretionary accruals, the lower the accruals quality. Findings The study finds that firms with poor accruals quality hold more cash and that cash holdings in firms of low reporting quality are higher under financial constraints. These results indicate that firms tend to increase their cash reserves in the presence of high information asymmetry which is notably driven by low accounting quality. The findings also suggest that information asymmetry associated with low reporting quality is greater when firms also have strong financial constraints. The study’s conclusions are consistent with the precautionary motive for cash holdings. Practical implications The results would enhance practitioners’ awareness of the importance of accounting choices in the management of cash policies. It would also give researchers an incentive to further explore how these policies are influenced by the precautionary behavior of managers. Originality/value This paper is the first work to investigate the effect of accruals quality on corporate cash holdings in the French equity market, which typically has a poor information environment resulting in high information asymmetry. Moreover, the role of financial constraints in this effect has not yet been explored.

Cash Holdings, Competition, and Innovation

2016 ◽  
Vol 51 (6) ◽  
pp. 1823-1861 ◽  
Author(s):  
Evgeny Lyandres ◽  
Berardino Palazzo
Keyword(s):  
Financial Constraints ◽  
Cash Holdings ◽  
Cash Holding ◽  
Product Markets ◽  
Innovative Firms ◽  
Uncertain Structure ◽  
Cash Policies ◽  
Intensity Of Competition ◽  
Commitment Device

We demonstrate theoretically and empirically that strategic considerations are important in shaping the cash policies of innovative firms. In our model, firms compete in product markets with uncertain structure using cash as a commitment device to invest in innovation. We show that firms’ equilibrium cash holdings are related to the expected intensity of competition. The sign and magnitude of this relation depends on firms’ financial constraints. Consistent with the strategic motive for hoarding cash, we show that firms’ cash holdings are negatively affected by their rivals’ cash-holding choices, even more so when competition is expected to be intense.

scholarly journals Share Pledging and Firm Cash Holdings: Evidence from Chinese A-share Listed Firms

2021 ◽  
Vol 7 (2) ◽  
pp. 41
Author(s):  
Hongmei Xu
Keyword(s):  
Cash Flow ◽  
Financial Constraints ◽  
Cash Holdings ◽  
Regulatory Change ◽  
Cash Dividend ◽  
Difference In Differences ◽  
Listed Firms ◽  
Main Effect ◽  
Cash Flow Sensitivities ◽  
A Share

This paper examines the relation between share pledging and cash holdings of Chinese A-share listed-firms. We find that during the years 2005 through 2015, the level of share pledging is negatively associated with cash holdings. We establish causality through a variety of econometric techniques, including a difference-in-differences approach based on a regulatory change that permits security companies to lend money to borrowers pledging their shares as collaterals. In addition, we find that the main effect is more prominent for financial constrained firms, and share pledging is associated with lower cash/investment-cash flow sensitivities and more cash dividend payouts. Overall, our findings indicate that share pledging can alleviate financial constraints of listed firms and reduce their tendencies of holding cash for precautionary motives.

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