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The Determinants of Cash Holdings among Colombian Firms


  • David Yepes

    () (Universidad EAFIT)

  • Diego Restrepo-Tobón

    () (Universidad EAFIT)


This paper researches the evolution of cash holdings and cash holding determinants for Colombian firms. Using information from financial statements from 2005 to 2012, and by implementing a dynamic panel analysis using a two-step generalized method of moments (GMM2) approach, the partial adjustment behavior of cash holdings and the links between cash holdings and firm size, risk, dividend payment, net working capital and the tax rate are studied, which are all explained by the trade-off model. Analogously, the relations of cash holdings with both cash flow and investment are explained using the financing hierarchy theory. In addition, evidence on precautionary motives are found that explains how firms reduce both refinancing risk and underinvestment risk through increasing their level of cash holdings

Suggested Citation

  • David Yepes & Diego Restrepo-Tobón, 2016. "The Determinants of Cash Holdings among Colombian Firms," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 85, pages 243-276, Julio - D.
  • Handle: RePEc:lde:journl:y:2016:i:85:p:243-276
    DOI: 10.17533/udea.le.n85a08

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    More about this item


    cash holdings; cash holding determinants; underinvestment risk; refinancing risk; access to finance;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other


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