A non-linear relationship between cash holdings and firm value: Study of companies in the emerging economy
Open Access
- 17 September 2021
- journal article
- Published by Virtus Interpress in Journal of Governance and Regulation
- Vol. 10 (4), 137-143
- https://doi.org/10.22495/jgrv10i4art12
Abstract
This research aims to gauge the effect of cash holdings on Jordanian companies’ value and to detect whether there is a non-linear association between them. By conducting a multivariate regression on 86 non-financial companies listed on Amman Stock Exchange (ASE) during the period from 2006 to 2017. The results of the research reveal that there is a significantly positive association between cash holdings and firm value. The study also shows the positive impacts of financial leverage and revenues growth on firm value, while the results show that a size of a company has a negative effect on a value of a company. Moreover, the study notices that there is no optimal level to reserve some cash in order to increase firm value in Jordan. The methodology of the study depends on the work of Martínez-Sola, García-Teruel, and Martínez-Solano (2013) and Nguyen, Nguyen, and Le (2016). This research documents a substantial contribution to the existing research works that investigate the association between cash holdings and firm value in an emerging market like Jordan. Moreover, the findings are recognized to be an interest to policymakers, scholars, and potential investors.Keywords
This publication has 21 references indexed in Scilit:
- Corporate cash holding and firm valueApplied Economics, 2011
- What drives corporate liquidity? An international survey of cash holdings and lines of creditJournal of Financial Economics, 2010
- Corporate cash holdings: An empirical investigation of UK companiesJournal of Banking & Finance, 2004
- Do Persistent Large Cash Reserves Hinder Performance?Journal of Financial and Quantitative Analysis, 2003
- Bank Power and Cash Holdings: Evidence from JapanThe Review of Financial Studies, 2001
- Corporate Cash Reserves and AcquisitionsThe Journal of Finance, 1999
- Corporate financing and investment decisions when firms have information that investors do not haveJournal of Financial Economics, 1984
- Determinants of corporate borrowingJournal of Financial Economics, 1977
- Theory of the firm: Managerial behavior, agency costs and ownership structureJournal of Financial Economics, 1976
- The General Theory of EmploymentThe Quarterly Journal of Economics, 1937