scholarly journals The Determinants of Corporate Cash Holdings: Do Firm Characteristics and Industry Matter?

2018 ◽  
pp. 866-877
Author(s):  
Jing-Hui Kwan ◽  
Wee-Yeap Lau
Keyword(s):  
Emerging Market ◽  
Cash Holdings ◽  
Order Theory ◽  
Firm Characteristics ◽  
Pecking Order Theory ◽  
Sectoral Differences ◽  
Dynamic Panel Regression ◽  
Hospitality Firms ◽  
The Difference ◽  
Corporate Cash Holdings

We join a recent surge of corporate cash literature by using a sample of hospitality firms to gain a new understanding of corporate cash holdings. Existing literature predominantly refers to US-listed firms and focus on either hotels or restaurants and not the hospitality industry as a whole. Therefore, we provide a comparative study of cash holdings behaviour between hospitality and non-hospitality firms in an emerging market context. Using a sample of public listed hospitality firms in Malaysia firms from 2002 to 2013, dynamic panel regression techniques are used to study the relationships between firm characteristics and cash levels. Also, the non-parametric Wilcoxon-Mann-Whitney test was carried out to examine the time and sectoral differences in cash holdings. The results reveal that firm characteristics do matter in hospitality firms. We also show that industry representation drives the difference in cash holdings between hospitality and non-hospitality firms. We find that firm size, capital expenditures, and liquid assets substitutes are negatively related to cash level. The results support trade-off theory and the pecking order theory. This study incrementally explains the cash holdings behaviour of hospitality firms in emerging market, such as Malaysia. This paper points to an avenue of investigation for future cash holdings research to include firm characteristics and industry as part of the cash holdings determinants.

Analysis of corporate cash holdings of firms in Malaysia

2014 ◽  
Vol 8 (2) ◽  
pp. 118-135 ◽  
Author(s):  
Shaista Wasiuzzaman
Keyword(s):  
Stock Prices ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Developed Countries ◽  
Order Theory ◽  
Least Square ◽  
Pecking Order Theory ◽  
Content Type ◽  
Corporate Cash Holdings

Purpose – The purpose of this paper is to understand the motives behind the levels of cash holdings and the theory that may be able to explain why these firms hold so much cash. Design/methodology/approach – Annual financial data and stock prices of 192 firms from six different sectors on the Bursa Malaysia are collected for the period 2000-2007. Analysis using the non-parametric Kruskal–Wallis test is carried out to analyze industrial and time differences in cash holdings. The ordinary least square (OLS) regression technique is used to understand the relationships between various attributes with the level of cash holdings. Due to issues of endogeneity, the generalized method of moments method is also applied. Findings – Significant differences are found to exist in the level of cash holdings between firms and across time. It is found that firms adjust to a target level of cash holdings, although this is done relatively slowly. Also, significance of firm characteristics and their relationships with cash holdings indicate that other than the pecking order theory, the trade-off theory and the agency theory can help explain the level of cash holdings of firms in Malaysia. Originality/value – Most studies on cash holdings have been carried out in developed countries. Malaysia is an advanced emerging market with significant state control and firm structure being largely family-oriented. Hence, a study on a different market with different types of firm structures will contribute significantly to the existing literature on corporate cash holdings.

The determinants of corporate cash holdings: evidence from Shariah-compliant and non-Shariah-compliant corporations

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Faisal Alnori ◽  
Abdullah Bugshan ◽  
Walid Bakry
Keyword(s):  
Cash Flow ◽  
Capital Expenditure ◽  
Cash Holdings ◽  
Order Theory ◽  
Working Capital ◽  
Pecking Order Theory ◽  
Content Type ◽  
Financial Firms ◽  
Operating Cash Flow ◽  
The Difference

PurposeThe purpose of this study is to investigate the difference between the determinants of cash holdings of Shariah-compliant and non-Shariah-compliant firms, for non-financial corporations in the Gulf Cooperation Council (GCC).Design/methodology/approachThe data include all non-financial firms listed in six GCC markets over a period 2005–2019. The IdealRatings database is used to identify Shariah-compliant firms in the GCC. To examine the determinants of cash holdings, a static model is used. To confirm the applicability of the method applied, the Breusch–Pagan Lagrange Multiplier (LM) and Hausman (1978) are used to choose the most efficient and consistent static panel regression.FindingsThe results show that, for Shariah-compliant firms, the relevant determinants of cash holdings are leverage, profitability, capital expenditure, net working capital and operating cash flow. For non-Shariah-compliant firms, the only relevant determinants of cash holdings are leverage, net working capital and operating cash flow. The findings suggest that the cash holding decisions of Shariah-compliant firms can be best explained using the pecking order theory. This reveals that Shariah-compliant firms use liquid assets as their first financing option, due to the Shariah regulations.Research limitations/implicationsFuture studies may investigate the optimal levels of cash holdings and compare the adjustment speeds toward target cash holdings of both the Shariah-compliant firms and their conventional counterparts.Originality/valueThis study is the first to investigate the difference between the determinants of cash holdings of Shariah-compliant and non-Shariah-compliant firms.

Corporate cash holdings and firm life cycle: evidence from China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ajid Ur Rehman ◽  
Tanveer Ahmad ◽  
Shahzad Hussain ◽  
Shoaib Hassan
Keyword(s):  
Life Cycle ◽  
Growth Stage ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
External Financing ◽  
Strategic Choices ◽  
Content Type ◽  
Firm Life Cycle ◽  
Corporate Cash Holdings

Purpose The purpose of this paper is to investigate how corporate cash holdings changes across firm life cycle and how firms undergo heterogeneous dynamic cash adjustment as they advance from one stage to the next stage. Design/methodology/approach This study uses an extensive data set of 2,994 Chinese A-listed firms. The authors use generalized method of moments (GMM) and Fisher Panel unit root testing to investigate the targeting behavior of Chinese firms. Findings The uni-variate investigation reveals that firms in the growth stage exhibits the highest cash levels and firms in the decline stage report the lowest cash levels. As growth firms have high investment needs, they may require raising external capital to meet investment needs. To avoid the costly external financing, firms in growth stage tend to hold more cash. The GMM estimation reveals that along all the phases of firm life cycle there are evidences of trade-off behavior of corporate cash holdings. The authors report that adjustment rate increases as firms enters into the growth stage. Practical implications The findings provide both theoretical and practical insight to align cash policies with the available strategic choices along firm life cycle in an emerging market characterized by market imperfections. Originality/value The study is unique from the context that it is applying robust methodology to one of rarely investigated area in corporate cash policy. The peculiar Chinese study setting characterized by higher information asymmetry, high cost of external financing and heterogeneous access to financing sources provide theoretical and empirical underpinnings to investigate and gain insight about how corporate cash policy can be aligned with strategic choices available across different stages of life cycle.

scholarly journals Does Leverage Constrain Real and AEM Around IPO Corporate Event? Evidence from the Emerging Market

2019 ◽  
Vol 20 (2) ◽  
pp. 354-367
Author(s):  
Sani Hussaini Kalgo ◽  
Bany-Ariffin A.N. ◽  
Hairul Suhaimi Bin Nahar ◽  
Bolaji Tunde Matemilola
Keyword(s):  
Earnings Management ◽  
Initial Public Offering ◽  
Emerging Market ◽  
Order Theory ◽  
Agency Cost ◽  
Free Cash Flow ◽  
Cross Sectional ◽  
Pecking Order Theory ◽  
Public Offering ◽  
The Impact

The article investigates whether Malaysian initial public offering (IPO) firms engage in real and accrual earnings management (AEM) and examines the impact of leverage on the earnings management’s discretionary behaviour of the firms for the period of 2003–2013. The Dechow, Sloan, and Sweeney (1995, The Accounting Review, 70[2], 193–225) cross-sectional modified Jones model was used to estimate discretionary accruals, while Roychowdhury’s (2006, Journal of Accounting and Economics, 42[3]), 335–370) cross-sectional models were used to investigate abnormal real activity discretionary behaviour. The results indicate Malaysian IPO firms engage in real and accrual discretionary behaviour. The graphical presentations of the earnings’ management proxies indicate higher real and AEM for high-leverage firms. Similarly, the multivariate analysis indicates a positive relationship between leverage and earnings management, which is in tandem with the agency cost of free cash flow theory and debt hypothesis. It is also consistent with the pecking-order theory of capital structure. This study suggests that regulatory agencies and standard setters should continue to improve quality of accounting reports in order to protect investors’ invested capital.

scholarly journals The Determinants of Corporate Cash Holdings: The Case of a Small Emerging Market

2016 ◽  
Vol 8 (1) ◽  
pp. 143
Author(s):  
Ghada Tayem
Keyword(s):  
Cash Flow ◽  
Emerging Market ◽  
Cash Holdings ◽  
Estimation Methods ◽  
Dynamic Effects ◽  
Growth Opportunities ◽  
Trade Off ◽  
Cash Flow Volatility ◽  
Cash Reserves ◽  
Corporate Cash Holdings

This study investigates the factors influencing the level of corporate cash holdings in the context of Jordan, a small emerging market characterized by large market frictions. This article employs the framework of the trade off, financing hierarchy, and managerial discretion theories to predict determinants of cash reserves. Then it examines these predictions using a sample of listed nonfinancial Jordanian firms over the period 2005-2013 using alternative estimation methods. Consistent with the trade-off theory, the results show that firm size and cash substitutes have negative and significant impact on cash holdings while growth opportunities and cash flow volatility have positive and significant impact. In addition, and consistent with the financing hierarchy view, the results show that cash flow and growth opportunities have positive and significant impact on cash holdings. Also, the study documents that leverage is negatively related to cash holdings while squared leverage is positively related to cash reserves. Finally, the results indicate that there are significant dynamic effects in determining cash holding targets.

Impact of Firm-specific Variables on Capital Structure Decisions. Evidence from the Indian Hospitality Sector

2021 ◽  
pp. 231971452110525
Author(s):  
Hardeep Singh Mundi ◽  
Jayant Gautam
Keyword(s):  
Capital Structure ◽  
Fixed Effects ◽  
Stock Exchange ◽  
Order Theory ◽  
Debt Ratio ◽  
Pecking Order Theory ◽  
Tax Shield ◽  
Hospitality Sector ◽  
Hospitality Firms ◽  
Fixed Effects Regression

This study investigates the determinants of capital structure for hospitality firms listed in India. The study validates the contradiction in the determinants of capital structure by using the data for firms listed on the Bombay Stock Exchange. Using fixed-effects regression models, the findings indicate that firm size and return on assets are significantly associated with total debt ratio (TDR), long-term debt ratio (LTDR) and short-term debt ratio. The variables such as growth rate, tangibility and volatility are found to be significantly associated with TDR and LTDR. Non-debt tax shield is found to be significantly associated with only TDR. Each of the stated determinants has a unique impact on capital structure decisions. The study partially confirms the applicability of the pecking order theory for hospitality sector firms. With the findings on hospitality firms, we hope to provide useful insights to lending institutions and corporate executives.

scholarly journals Capital Structure Choices in Technology Firms: Empirical Results from Polish Listed Companies

2020 ◽  
Vol 13 (9) ◽  
pp. 221 ◽  
Author(s):  
Marcin Kedzior ◽  
Barbara Grabinska ◽  
Konrad Grabinski ◽  
Dorota Kedzior
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Emerging Market ◽  
New Technology ◽  
Order Theory ◽  
High Tech ◽  
Developed Country ◽  
Pecking Order Theory ◽  
Warsaw Stock Exchange ◽  
External Acquisition

The main aim of the paper is the identification of capital structure determinants, with a special emphasis on investments in the innovativeness of Polish New Technology-Based Firms (NTBFs). Poland is a unique country in that it is an emerging market that was also promoted in 2018 to the status of a developed country. The study sample consisted of 31 companies listed in the Warsaw Stock Exchange that are classified as high-tech firms and covers the period 2014–2018. The following factors influencing the capital structure were analyzed: internal and external innovativeness and the firm’s size, liquidity, intangibility, age, profitability, and growth opportunities. The results of the research provide empirical evidence that liquidity, age, and investments in innovativeness determine capital structure, which provides an additional argument supporting the trade-off theory and the modified version of the pecking order theory. More specifically, the results suggest that companies whose process of investment in innovativeness is based on the external acquisition of technology are able to attract external financing, while the process based on internally generated innovativeness (R&D activity) deters external capital. The results are interesting for policymakers in emerging markets.

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