Corporate Cash Holdings and Financial Crisis: Evidence from Developing and Developed Markets

The article examines the pattern of cash holdings of 266 Indian companies comprised in the S&P BSE 500 index for the period 2005–2015 to understand the factors that influence the level of cash balances, to estimate the amount of excess cash held by these companies and to analyse how these companies spend their excess cash. The sample companies hold approximately 12 per cent of their total assets as cash in 2015. The pattern of cash holdings of the sample companies is supported by the static trade-off and the financing hierarchy model. Consistent with earlier evidence, firms with large cash balances have strong growth opportunities, larger cash flows, higher cash flow volatility, higher leverage, higher level of promoter holding and belong to the government-owned sector. Companies that have more liquid assets other than cash have more tangible assets and pay more to their shareholders hold lower cash balances. However, contrary to earlier evidence, size of the firm is not related to the amount of cash holding. Further, firms with large cash balances have higher leverage. The study does not find association of cash holding with many other variables found to have association with cash holding in developed markets. A large number of the firms in the sample hold cash in excess of what is predicted on the basis of firm’s characteristics. These companies manage their cash balances in a manner that is not consistent with maximization of shareholders’ wealth.

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Corporate Cash Holdings and Financial Crisis: Evidence from Jordan

International Business Research ◽

10.5539/ibr.v8n5p212 ◽

2015 ◽

Vol 8 (5) ◽

Cited By ~ 3

Author(s):

Asma’a Al-Amarneh

Keyword(s):

Financial Crisis ◽

Cash Holdings ◽

Corporate Cash Holdings

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Foreign ownership, state ownership and cash holdings under the global financial crisis: evidence from the emerging market of Vietnam

International Journal of Emerging Markets ◽

10.1108/ijoem-03-2020-0303 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Quynh Nga Nguyen Thi ◽

Quoc Trung Tran ◽

Hong Phat Doan

Keyword(s):

Financial Crisis ◽

Global Financial Crisis ◽

Emerging Market ◽

Cash Holdings ◽

Foreign Ownership ◽

State Ownership ◽

Exogenous Shock ◽

Content Type ◽

The Global Financial Crisis ◽

Corporate Cash Holdings

PurposeThis paper investigates how the global financial crisis changes the effects of state ownership and foreign ownership on corporate cash holdings in an emerging market.Design/methodology/approachWe employ an interactive term between state ownership (foreign ownership) and a crisis dummy to analyze how the global financial crisis determines the effect of state ownership (foreign ownership) on corporate cash holdings.FindingsWith a research sample including 5,493 observations from 621 listed firms over the period 2007–2017, we find that state ownership (foreign ownership) is negatively (positively) related to corporate cash holdings and the effect of state ownership (foreign ownership) is stronger (weaker) during the crisis period. Moreover, the increase in the effect of state ownership is larger in financially unconstrained firms.Originality/valuePrior research shows that the effects of state ownership and foreign ownership on corporate cash holdings in emerging markets are still debatable. This paper extends this line of research by investigating how the global financial crisis – an exogenous shock – changes these effects.

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Long-Term Effects of a Financial Crisis: Evidence from Cash Holdings of East Asian Firms

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109012000142 ◽

2012 ◽

Vol 47 (3) ◽

pp. 617-641 ◽

Cited By ~ 57

Author(s):

Kyojik (Roy) Song ◽

Youngjoo Lee

Keyword(s):

Financial Crisis ◽

East Asian ◽

Cash Holdings ◽

Firm Characteristics ◽

Long Term Effects ◽

Long Term Effect ◽

Increased Sensitivity ◽

Cash Flow Volatility ◽

Corporate Cash Holdings

AbstractWe investigate the long-term effect of the Asian financial crisis on corporate cash holdings in 8 East Asian countries. The Asian firms build up cash holdings by decreasing investment activities after the crisis. We find that the increase in cash holdings is not explained by changes in firm characteristics but by changes in the firms’ demand function for cash, which indicates that the crisis has systematically changed the firms’ cash-holding policies. Specifically, the firms’ increased sensitivity to cash flow volatility is one of the main factors explaining the higher level of their cash holdings in the postcrisis period.

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