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Cash holdings: International evidence

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  • Alves, Duarte
  • Alves, Paulo
  • Carvalho, Luis
  • Pais, Claudio

Abstract

The goal of this paper is to study how firms’ cash holdings have recently performed. We have not only used GMM approach, but also a pioneer econometric approach to evaluate the determinants of firms’ cash holdings, ML-SEM. The results are more robust in comparison with those obtained using GMM. Our results showed that cash holdings have increased during the 2008 financial crisis and rose significantly after that time. The exception were firms placed in the United States and emerging markets. We have found that cash holdings, in general, were positively influenced by the banking system and capital market, although the results have been more robust for the first variable. Our results also showed that the development of the rule of law and shareholder rights lead to a decrease on firms’ cash holdings, which confirms the agency theory as an explanation of firms’ cash holdings.

Suggested Citation

  • Alves, Duarte & Alves, Paulo & Carvalho, Luis & Pais, Claudio, 2022. "Cash holdings: International evidence," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    • Handle: RePEc:eee:joecas:v:26:y:2022:i:c:s1703494922000330
    DOI: 10.1016/j.jeca.2022.e00273
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    More about this item

    Keywords

    Financial crisis; Capital market development; Domestic credit;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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