The Nexus Between Corporate Cash Holdings and Corporate Financialisation in Listed South African Non-financial Firms

South Africa continues to experience symptoms of premature deindustrialisation and a stagnant economy wherein non-financial corporations have increased the proportions of the cash holdings and financialisation. This study investigates whether the gains from corporate financialisation, driven by the growth of shareholder value ideology, influence the cash holding behaviour of non-financial firms. There have been observable patterns of increasing cash holdings, reduced real investment, and increased participation in financial activities by traditionally non-financial corporations. There remains a dearth of empirical studies that investigate whether corporate cash holdings are driven by the financialisation of non-financial firms. We analyse panel data of NCFs listed on the South African, Johannesburg Stock Exchange (JSE) covering a period from 2000 to 2020. This study finds that the financialisation of investments and operations of non-financial firms positively drives corporate cash holdings. Cash holdings provide firms with the flexibility to invest in profitable but short-term financial investments. By showing the confluence between corporate financialisation and corporate cash holdings, this study can assist policymakers in understanding how shareholder value maximisation ideology has transformed corporate strategy from the traditional ‘retain and reinvest’ to ‘dominate and distribute’ and to ‘downsize and distribute’. This study provides a new way of understanding the drivers of cash holdings of NCFs listed on the JSE. The increasing financialisation of South African NCFs is enabled by high corporate cash holdings.