Cash Holdings Management, Organizational Capital, and Stock Liquidity: The Precautionary Motive for Risk Mitigation

The author examines the combined effects of corporate governance quality, stock liquidity, and asset profitability under conditions of financial constraints. Effective company management serves as an important signal for potential investors. Improving the quality of financial information not only enhances investor trust but also enables management to obtain a comprehensive view of the firm’s business activities, thereby supporting informed decision-making. The financial position of a business entity and its investment prospects are largely determined by the quality of management. Organizational capital is used as a proxy variable for corporate governance quality. Management exercises direct control over operational costs, which allows it to effectively manage changes within the firm. Tightening monetary policy not only increases the cost of borrowing but also reduces real incomes and suppresses the investment activity of Russian public companies. A high key interest rate set by the Bank of Russia leads to a sharp decline in industrial investment and extends project investment horizons. As a result, these companies are likely to forgo economically attractive investment projects. Under these conditions, they are likely to behave in line with the precautionary motive by retaining a portion of their funds to finance their business activities and adjust their capital structure amid limited access to debt financing. Stock liquidity serves as an important reference point in investors’ analysis and evaluation of stock returns. The preparation of financial reporting in accordance with international standards provides the necessary information for decision-making not only for management but also for investors, thereby sending them a signal that, under adverse conditions (external sanctions), ultimately affects the share prices.