Determinants of Corporate Cash Holding

Abstract

Cash held by firms is a significant part of the balance sheet that is a critical source for for-profit organizations and creating a balance between available cash and cash requirements is the most significant factor concerning the economic viability of a for-profit company. Cash management is a broad area having to do with the collection, concentration, and disbursement of cash including measuring the level of liquidity, managing the cash balance, and short-term investment. So, one aspect of cash management is knowing the Optimum cash balance which should be targeted so that costs are minimized. In this paper, by using multiple regression method and employing panel data, we investigated the determination of corporate cash holding. To accomplish this research, the financial data pertaining to 144 companies working in Tehran Stock Exchange (TSE) between the years 1380-1388 (2001-2009) have been selected. The results demonstrates that, at 90% level there is a significant relation between cash and market-to-book, firm size, cash from operation, net working capital, capital expenditure, leverage and tax.

Keywords

• Estimated Cash; Cash Holding; Liquidity; Cash Management