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On the Determinants of SME Cash Holdings: Evidence from Spain

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  • Pedro J. García‐Teruel
  • Pedro Martínez‐Solano

Abstract

This work analyses the factors that might explain the level of cash holdings in a sample of 860 small and medium‐sized firms from Spain during the period 1996–2001. The empirical results show that firms have a target cash level to which they attempt to converge. The level of this target is higher for firms with more growth opportunities and larger cash flows. In contrast, the target level for cash holdings falls when the use of bank debt and the presence of substitutes for cash increase. Moreover, when the interest rates in the economy increase firms reduce their cash holding.

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  • Pedro J. García‐Teruel & Pedro Martínez‐Solano, 2008. "On the Determinants of SME Cash Holdings: Evidence from Spain," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(1‐2), pages 127-149, January.
  • Handle: RePEc:bla:jbfnac:v:35:y:2008:i:1-2:p:127-149
    DOI: 10.1111/j.1468-5957.2007.02022.x
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