130 2022, XXV, 1
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10.15240/ ul/001/2022-1-008
DETERMINANTS OF CASH HOLDINGS:
EVIDENCE FROM BALKAN COUNTRIES
Bojana Vuko ić1, K is ina Mijić2, Dejan Jakšić3, Dušan Sako ić4
1 Uni e si y o No i Sad, Facul y o Economics in Subo ica, Depa men o Finance and Accoun ing, Republic
o Se bia, ORCID: 0000-0002-2147-8877, [email p o ec ed];
2 Uni e si y o No i Sad, Facul y o Economics in Subo ica, Depa men o Finance and Accoun ing, Republic
o Se bia, ORCID: 0000-0001-9851-1025, [email p o ec ed];
3 Uni e si y o No i Sad, Facul y o Economics in Subo ica, Depa men o Finance and Accoun ing, Republic
o Se bia, ORCID: 0000-0003-1711-1869, [email p o ec ed];
4 Uni e si y o No i Sad, Facul y o Economics in Subo ica, Depa men o Finance and Accoun ing, Republic
o Se bia, ORCID: 0000-0003-2742-2388, [email p o ec ed].
Abs ac : The pu pose o his pape is o iden i y he de e minan s and indica e hei impac on he
company’s cash holdings in he wholesale indus y in en Balkan coun ies. E ec i e cash holdings
managemen is key o any company’s heal hy and smoo h business ope a ion, so comp ehending
and analyzing he ela ionship be ween he company’s in e nal de e minan s and cash holdings
is i al. The sample used o his wo k included 106 companies, whose ope a ions we e s udied
o e a ou -yea pe iod (2014–2017), using he panel da a model wi h ixed e ec s. The ob ained
esul s showed ha h ee o he i e obse ed a iables (size, le e age, non-cash liquid asse s,
p o i abili y and asse angibili y) ha e a s a is ically signi ican impac on he company’s cash
holdings. I was de e mined ha la ge wholesale companies gene ally hold less cash, p ima ily
due o mo e a o able ex e nal sou ces o inancing, hus, inancially s onge wholesale companies
on he Balkans a e likely o hold less cash. Only by p ac icing adequa e in en o y managemen
and ecei ables collec ion policy can wholesale companies ensu e e ec i e wo king capi al,
leading o he ac ha mo e p o i able wholesale companies hold mo e cash. The ealized p o i
o wholesale companies is used o inc ease liquidi y as well as o s imula e business g ow h and
de elopmen . The esea ch esul s e ealed ha , in o de o achie e an op imal cash holdings
le el, he obse ed wholesale companies in Balkan coun ies end o cons an ly balance be ween
p o i abili y and liquidi y. This pape con ibu es o imp o ing he liquidi y o wholesale companies in
Balkan coun ies. I also o e s wholesale companies assis ance in es ablishing and main aining an
op imal cash holdings policy in o de o educe he po en ial isk o inancial dis ess enable hem
o ake ad an age o all in es men al e na i es o maximize p o i . All s akeholde s will bene i
om he de eloped model wi h signi ican de e minan s o he cash holdings policy along wi h
he indings o his pape , especially when making decisions ela ed o he cash holdings policy o
wholesale companies and imp o ing he o e all business e iciency.
Keywo ds: Cash holdings, de e minan s, wholesale companies.
JEL Classi ica ion: G30, G32.
APA S yle Ci a ion: Vuko ić, B., Mijić, K., Jakšić, D., & Sako ić, D. (2022). De e minan s o
Cash Holdings: E idence om Balkan Coun ies. E&M Economics and Managemen , 25(1),
130–142. h ps://doi.o g/10.15240/ ul/001/2022-1-008
In oduc ion
Cash is one o he key i ems in he balance
shee , since i is necessa y o e e y ansac ion.
Cash holdings p o ide he company wi h
lexibili y and he abili y o mee i s own needs,
ega dless o exis ing business condi ions.
I can be signi ican in e ms o he company’s
in e nal inancing, hus i is c ucial o main ain
an op imal le el o cash, gi en ha ex e nal
inancing also en ails ce ain cos s. An op imal
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le el o cash holdings ep esen s a ailable
money o in es o s and should inc ease gene al
business e iciency. Achie ing an op imal
le el o cash holdings p o ides he company
wi h au onomy o explo e new oppo uni ies
as well as ake isks. An insu icien le el
o cash c ea es he need o inancing om
ex e nal sou ces, which is e lec ed in educed
in es men s and dec eased sale o a ailable
asse s and secu i ies. Howe e , a la ge
amoun o cash enables he company o
espond o ma ke ends and ake ad an age
o in es men oppo uni ies so as o secu e
he inancial powe o he company. In ce ain
ci cums ances, keeping a la ge amoun o cash
can indica e an imp ope alloca ion o a ailable
company’s asse s. Resea ch conduc ed by
An on and A loa ei Nucu (2019) e ealed ha
a company wi h la ge cash holdings should
educe i o an op imal le el in o de o inc ease
i s alue.
The policy o keeping an op imal le el o
cash is among he p ima y goals o co po a e
inancial managemen . Due o ma ke
impe ec ions, ansac ion cos s, ax and
bank up cy cos s, and in o ma ion asymme y,
he e a e di e en mo i es o holding cash.
The mo i es aiming o educe ansac ion
cos s assume ha , by holding liquid asse s,
he companies will educe he ansac ion
cos s, cos s o ob aining ex e nal sou ces
o inancing and cos s o liquida ing asse s.
A company can educe i s ansac ion cos s by
using a ailable cash o paymen s a he han
by selling asse s. This p ecau iona y mo i e is
based on he assump ion ha holding a ce ain
le el o cash is essen ial in o de o p o ec
companies om ei he a lack o money in he
u u e, o om ex e nal sou ces o inancing
which a e expensi e and di icul o access. The
unde lying mo i es include u u e needs and
po en ial in es men oppo uni ies, which a e
also he mos common easons o he inc ease
in cash ese es. Holding cash is necessa y
due o he inc eased olume o bo owing and
consequen ly, en ails a g ea e possibili y o
inancial ailu e. Acco ding o he p ecau iona y
mo i es, keeping la ge cash ese es is aimed
a educing he olume o bo owing o se ling
liabili ies om bo owed capi al. Asymme ic
in o ma ion, mos o en he esul o a con lic
be ween he manage and sha eholde , ends
o c ea e he need o accumula e cash. Cash
ese es a e impo an in he ci cums ances
when in es men oppo uni ies p esen
hemsel es, hus aking ad an age o all
a ac i e in es men s. Mos o en, hese
a e inancial companies ha a e di ec ed
owa ds specula i e in es men mo i es in
he u u e, a he han in es ing in unce ain
cu en business condi ions. Tax mo i es a e
condi ioned by ax liabili ies and incen i es ha
a ec holding cash. Tax legisla ion encou ages
mul ina ional companies o accumula e cash
and hey o en choose o accumula e cash,
a he han dis ibu e i o sha eholde s, since i
a oids paying di idend axes.
The p esen esea ch is aimed a iden i ying
he ac o s ha in luence cash holdings, so
ha he company can u ilize all he bene i s
e lec ed in, e.g., educing bo owing cos s,
c ea ing in es men oppo uni ies ega dless
o inancial cons ain s and educing he
possibili y o inancial dis ess. This means
de e mining how cash holdings can be a ec ed,
o how an op imal cash holdings policy can be
es ablished and main ained is a c ucial ask.
The ob ained esul s can se e he manage s
o wholesale companies as guidelines o
imp o e hei compe i i e posi ion, di ec unds
owa ds p o i able in es men oppo uni ies and
con ibu e o inc eased business e iciency. The
indings can also be use ul o s akeholde s
when making decisions abou he company’s
cash holdings, in es men decisions and
decisions abou he alloca ion o unds in he
ma ke . Sha eholde s may u he bene i om
he ob ained esul s by conside ing how o
manage cash holdings in o de o maximize
hei weal h.
This s udy was mainly mo i a ed by he
insu icien scope o esea ch on he cash
holdings policy o wholesale companies in
Balkan coun ies. In addi ion, p e iously
conduc ed esea ch abou cash holdings
policy ha e hei limi a ions o applica ion in he
Balkan coun ies. Companies in he wholesale
sec o a e cha ac e ized by di icul y in liquidi y
condi ions and he high inancial isk o he
ope a ions; consequen ly, hey s uggle o
achie e an accep able le el o indeb edness.
The wholesale sec o , hough, is one o he
mos p o i able sec o s. The pu pose o his
pape was o de elop a model highligh ing he
indica o s o u ilizing sui able cash holdings
policy o he wholesale companies in he
Balkans. The pape seeks o answe he
ollowing esea ch ques ions:
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Wha a e he company’s in e nal
de e minan s ha ha e an impac on he cash
holdings o he wholesale companies in he
Balkan coun ies?
Wha is he ela ionship be ween he
in e nal de e minan s and cash holdings o he
wholesale companies in he Balkan coun ies?
The pape analyzed he impac o i e
independen a iables (size o he company,
le e age, non-cash liquid asse s, p o i abili y,
asse angibili y) on he company’s cash
holdings, measu ed by he cash holdings a io in
he wholesale indus y he ollowing en Balkan
coun ies: G eece, Albania, Bulga ia, Slo enia,
Romania, Macedonia, C oa ia, Bosnia and
He zego ina, Se bia and Mon eneg o. In
o de o e alua e he impac o he e alua ed
de e minan s on cash holdings, he panel
da a model wi h ixed e ec was used. The
pape ’s s uc u e is as ollows: he i s sec ion
ou lines he Theo e ical Backg ound. The wo k
con inues wi h he Da a and Me hodology pa ,
ollowed by he Resul s and Discussion. The
las pa o he pape , he Conclusion, concedes
he limi a ions and o e s di ec ions o u u e
esea ch.
1. Theo e ical Backg ound
In o de o s udy he impac o he company’s
in e nal cha ac e is ics on cash holdings policy,
h ee heo ies we e de eloped: he ade-o
heo y, he pecking o de heo y and he ee
cash low heo y. The ade-o heo y assumes
ha companies habi ually seek o de e mine
he op imal le el o cash holdings, aking in o
accoun all he cos s and bene i s. Bea ing in
mind ha he manage s’ goal in he company is
o maximize sha eholde weal h, hey will s i e
o keep he cash holdings a a le el whe e he
ma ginal bene i s and ma ginal cos s o holding
cash a e balanced.
Holding cash educes he likelihood o
inancial ailu e, p o ides p o ec ion agains
unexpec ed losses and minimizes he cos o
collec ing ex e nal sou ces o inancing. The
economy o scale p omp s la ge companies o
hold less cash. Smalle companies gene ally
ely on hei unding sou ces, so hey ha e lowe
liquidi y and do no o en issue sha es. Such
companies ace limi ed bo owing condi ions and
high ex e nal inancing cos s as well as g ea e
asymme y in in o ma ion. Companies ha a e
awa e o he g owing likelihood o inancial ailu e
usually p o ec hemsel es by accumula ing
cash acco ding o he p ecau iona y mo i es o
he ade-o heo y.
The pecking o de heo y se s ou om he
in o ma ion asymme y be ween manage s
and sha eholde s, ha causes expensi e
ex e nal inancing. In o de o minimize he
cos s o in o ma ion asymme y and inancing,
companies mus inance in es men s, i s o
all, wi h e ained ea nings, hen wi h bo owed
capi al and inally, wi h hei own capi al.
Acco ding o his heo y, cash holdings should
be a a le el ha will achie e a balance
be ween e ained ea nings and in es men
needs. Fe ei a and Vilela (2004) s a ed ha
he use o bo owed esou ces would inc ease
when i became necessa y o in es mo e
han he amoun o he company’s e ained
ea nings. A company wi h g ea e in es men
oppo uni ies c ea es he need o mo e cash,
indica ing a posi i e ela ionship be ween
holding cash and in es men oppo uni ies.
The s a ing poin o he ee cash low heo y
is ha keeping a la ge amoun o cash p o ides
g ea e managemen powe and educes he
p essu e on managemen o achie e he desi ed
pe o mance. I enables he managemen o
in es acco ding o hei in e es s, ega dless o
he in e es s o sha eholde s. This may lead o
a con lic o in e es in he manage -sha eholde
ela ionship, since he a ailable cash is iewed
as ee cash low ha sa is ies he in e es s
o managemen . Good co po a e go e nance
should be in he in e es o he p incipal-agen
ela ionship so ha agen s would no a o
hei in e es s. I he e a e la ge sha eholde s
in he company, hey will seek o educe he
agency cos s ha exis be ween manage s and
sha eholde s. P oponen s o he ee cash low
heo y ind ha companies ha do no ha e
much g ow h po en ial and de elopmen end o
accumula e la ge amoun s o cash.
Gi en hese heo e ical assump ions, his
pape examines he i e ac o s de e mined
as in e nal cha ac e is ics o he company and
hei impac on cash holdings policy. The choice
o ac o s is based on he analysis o p e ious
esea ch, he a iables used and he da a
a ailable in he inancial s a emen s. A de ailed
explana ion o hese ac o s will be p esen ed
below.
1.1 Size o he Company
In o de o analyze he ela ionship be ween
he size o he company and he amoun o
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i s cash holdings, he au ho s se ou om he
ade-o heo y and he pecking o de heo y.
Small companies su e om in o ma ion
asymme y p oblems and inancial cons ain s
when acqui ing ex e nal sou ces o inancing
(Ogunpide e al., 2012). They also ha e highe
ansac ion cos s and o en un a g ea e isk o
inancial ailu e due o he less di e si ica ion.
Small companies a e mo e suscep ible o he
impac o impe ec ions on capi al ma ke s.
Gi en he abo e ci cums ances, i is ob ious
ha small companies should possess a la ge
amoun o cash, which is in line wi h he ade-
o heo y equi emen s.
Ople e al. (1999) esea ched he
de e minan s o he cash holdings policy
o 1,084 US companies whose sha es a e
publicly aded in he pe iod om 1971 o 1994.
The ob ained esul s showed ha keeping
a la ge olume o cash is cha ac e is ic o
smalle companies ha usually ha e g ea e
oppo uni ies o g ow h, de elopmen ,
in es men , a la ge olume o iskie ac i i ies
as well as a highe le el o business isk. On
he o he hand, holding a small amoun o cash
is cha ac e is ic o la ge companies, which a e
usually companies wi h a high c edi a ing and
olume o bo owing. Fe ei a and Vilela (2004)
con i med he nega i e ela ionship be ween
he size o he company and cash holdings
policy analyzing he key ac o s o cash holdings
policy in EMU coun ies.
Howe e , he ini ial assump ion o he
pecking o de heo y is ha la ge companies
a e mo e success ul and hold cash on
a la ge scale due o highe p o i abili y. La ge
companies o en hold hei e ained ea nings
as cash, indica ing he need o hold mo e cash.
Also, hey ha e a high le el o ope a ing cash
low and o en accumula e la ge sums o cash
o p o ec hemsel es om being aken o e .
Acco dingly, he ee cash low heo y also
p edic s a g ea e need o la ge companies o
ha e cash holdings due o la ge sha eholde
dispe sion, mo e disc e iona y powe o
manage s o e he company in es men and
inancial policies and g ea e agency p oblems
in he u u e.
Isshaq and Bokpin (2009) ha e analyzed
liquidi y de e minan s o Ghanaian companies
lis ed on he s ock ma ke in he pe iod om
1991 o 2007. Thei esea ch has shown
ha i m size is one o he key indica o s o
liquidi y main enance, p o iding a s a is ically
posi i e ela ionship be ween i m size and
liquidi y. Siddiqua e al. (2019) s a ed om
he ac ha he op imal size o he company in
a ce ain indus y leads o low p oduc ion cos s,
suppo ing he posi i e ela ionship be ween
company size and cash holdings. He poin ed
ou ha he companies wi h highe p o i s ake
ad an age o economies o scale and highe
ma ke sha es and hus hold highe cash
ese es han companies ope a ing a lowe
p o i s.
The s udy o Shabbi e al. (2016) con i med
he posi i e ela ionship be ween he size o
he company and cash holdings, emphasizing
ha companies in highly compe i i e indus ies
would hold mo e cash han in o he indus ies
and hose wi h be e access o he capi al
ma ke bo owed unds om ex e nal in es o s.
Saddou (2006) ound ha he e was a posi i e
co ela ion be ween size and cash holdings
o F ench ma u e companies. In con as ,
he e is a nega i e co ela ion be ween size
and he le el o cash holdings o g owing
companies. Al-Ama neh (2015) esea ched
he impac o company size on cash holdings
be o e and du ing a c isis pe iod. Be o e he
c isis, he company’s size had a posi i e impac
on cash holdings due o be e business o
la ge companies. Ye , du ing he c isis, he
company’s size had a nega i e impac on cash
holdings and la ge companies ook ad an age
o economies o scale in o de o educe
ansac ion cos s.
Bea ing in mind all p e iously-men ioned
esea ch in his ield, he ollowing esea ch
ques ion has a isen:
Wha is he impac o he size o he
company on he cash holdings?
1.2 Le e age
Acco ding o he pecking o de heo y, when
he company does no ha e enough cash, i
bo ows om ex e nal sou ces, so he e is
a nega i e ela ionship be ween cash holdings
and inancial le e age. Le e age inc eases
and cash holdings dec ease when he le el
o in es men s is g ea e han he e ained
ea nings, whe eas le e age dec eases and
cash holdings inc ease when he le el o
in es men s is less han he e ained ea nings.
As sugges ed by he pecking o de heo y,
he e is no op imal le el o bo owing o holding
cash o he company. Due o lowe le e age,
companies a e less ulne able o ma ke
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moni o ing (Ople e al., 1999). This ac ually
means, manage s o less le e aged companies
ha e mo e disc e iona y powe (Fe ei a &
Vilela, 2004), gi en ha hey ha e a smalle
olume o equi emen s by c edi o s. The e o e,
acco ding o he equi emen s o he ee cash
low heo y, he deb le el de e mines he
manage ’s ac ions, while he expec ed ela ion
be ween le e age and cash holdings is also
nega i e. This is suppo ed by he ac ha he
company can main ain inancial lexibili y wi h
a lowe le el o bo owing and a la ge amoun
o cash ese es. The company wi h highe
le e age can ha e lowe cash holdings because
o he highe oppo uni y cos . Acco ding o Kim
e al. (1998), a company wi h a high le el o
le e age usually keeps lowe cash holdings
due o easie access o capi al ma ke s and
highe in e es a es. Assuming ha high
le e age is an indica o o a company’s abili y
o bo ow, Ozkan and Ozkan (2004) poin ed ou
ha companies o en bo ow in exchange o
holding la ge cash amoun s and secu i ies. In
addi ion, he nega i e alue o he le e age a io
may signi y ha he cos o keeping a high le el
o cash inc eases wi h he g ow h o bo owing.
Analyzing he mo i es o holding cash o
Japanese companies, he esul s ob ained by
Nguyen (2005) showed ha he companies
mos o en use hei cash lows o se le deb ,
which con i ms he in e se ela ionship be ween
le e age and holding cash. Companies hold
su plus cash e en in ci cums ances when hey
ha e p e iously exhaus ed own cash lows.
The ade-o heo y se s ou om he
assump ion ha indeb ed companies ind i
di icul o ob ain cash, hence, hey will usually
hold mo e cash. Holding mo e cash is a ce ain
o m o insu ance ha educes he likelihood o
inancial dis ess in he u u e, p obably al eady
in ensi ied due o high le e age. Consequen ly,
he e is a posi i e ela ionship be ween cash
holdings and le e age, as was highligh ed in
esea ch conduc ed by D obe z and G üninge
(2007) and A o a (2019). Acco ding o he
ade-o heo y, he ela ionship can also be
nega i e. As a measu e o inancial isk, he
le e age a io is seen as a kind o a p oxy o he
company’s abili y o issue deb , so he company
wi h highe abili y has lowe cash holdings.
Likewise, ex e nal unds can be used o inance
he company’s in es men s and hus iewed as
a subs i u e o cash, which, in ac , con i ms
he nega i e ela ionship be ween hese wo
a iables. Howe e , highe bo owing does
no ha e o be accompanied by mo e e icien
in es men o a ailable unds and a highe le el
o e u n on unds.
Acco ding o Guney e al. (2007), he
speci ics o he coun y whe e he companies
ope a e, such as sha eholde p o ec ion,
owne ship concen a ion and c edi p o ec ion
oo, can de e mine he ela ionship be ween
cash holdings and le e age. Fo ins ance, he
company’s owne ship s uc u e signi ican ly
in luences i s co po a e cash holdings policy.
I , in ce ain coun ies, sha eholde p o ec ion
is poo , companies end o ha e signi ican ly
g ea e amoun s o cash han in he coun ies
ha ha e be e sha eholde p o ec ion.
Based on he equi emen s o he pecking
o de heo y and mos o he p e iously lis ed
esea ch, he esea ch should answe he
ollowing ques ion:
Wha is he impac o he le e age on he
cash holdings?
1.3 Non-cash Liquid Asse s
Due o he ola ili y o he inancial ma ke s,
companies o en hold liquid asse s o p o ec
hemsel es om a po en ial sho age o unds
o o sol e a liquidi y p oblem.
Es ablishing an op imal le el o liquidi y is
one o he key goals o he company, bea ing in
mind ha oo high liquidi y indica es a su plus
o cash ha does no se e he in es men and
does no b ing economic bene i s in he u u e.
Non-cash liquid asse s a e cash subs i u es ha
can be easily con e ed in o cash due o he low
cos o con e ing. I is a con enien way o a oid
he high cos s o ex e nal inancing in he capi al
ma ke . In ci cums ances when he e a e highe
ansac ion cos s o con e ing non-cash asse s
in o cash, he company will hold a g ea e amoun
o cash holdings. Acco ding o Ozkan and Ozkan
(2004), a la ge olume o non-cash liquid asse s
held by he company means ha he company
s i es o educe he le el o cash holdings due
o p ecau iona y mo i es. Guided by ansac ion
mo i es, in he case o highe non-cash liquid
asse s, companies will ha e lowe cash holdings
because o hei subs i u abili y.
Ople e al. (1999) poin ed ou ha he
companies wi h be e access o he capi al
ma ke and high c edi a ings ha e lowe
le el o non-cash liquid asse s. Analyzing
he ac o s ha ha e an impac on he le el
o cash balances, A o a (2019) esea ched
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cash holdings de e minan s o 266 Indian
companies om 2005 o 2015 and con i med
ha he companies wi h mo e non-cash
liquid asse s hold smalle amoun s o cash
balances. Based on he pecking o de heo y
and ee cash low heo y, he e is no signi ican
ela ionship be ween liquid asse s subs i u es
and cash holdings. Con e sely, by analyzing
he de e minan s o cash holdings policy o
44 small and medium lis ed companies in he
Ka achi s ock exchange o he pe iod o 2006
o 2011, Na es e al. (2017) e ealed a posi i e
ela ionship be ween liquid asse s subs i u es
and cash holdings. They also emphasized ha
he liquidi y p oblem is one o he key p oblems
ha has caused small and medium companies
o ha e low cash holdings and non-cash liquid
asse s. Analyzing he cash holdings in I alian
p i a e companies, Bigelli and Sánchez-Vidal
(2012) in e ed ha smalle , younge and mo e
inancially cons ained companies ended
o ha e mo e cash holdings and ewe cash
subs i u es han la ge companies in I aly.
Keeping in mind he equi emen s o he
ade-o heo y and he p e iously ou lined
esea ch, he au ho s o mula ed he ollowing
ques ion:
Wha is he impac o he non-cash liquid
asse s on he cash holdings?
1.4 P o i abili y
The cash holdings policy is based on
main aining he liquidi y and p o i abili y o
he company. Cash can be de ined as he
leas p o i able asse , which does no p o ide
a e u n. The olume o cash holdings is usually
he esul o he company’s p o i abili y and
inancial needs. Assuming ha each p o i able
company makes highe cash lows om
ope a ing ac i i ies, he eby dec easing he
need o s ockpiling cash, Kim e al. (1998)
emphasized ha p o i abili y can be iewed as
a cash holdings subs i u e. The company can
use i s p o i o pay o he liabili ies, so ha he
company wi h a highe le el o cash usually
has less p o i abili y. The nega i e ela ionship
be ween p o i abili y and cash holdings was
con i med in esea ch conduc ed by Ogunpide
e al. (2012), and Thu and Khuong (2018). In
line wi h he ade-o heo y, he company
usually elies on u u e cash lows in o de o
inc ease he olume o cash holdings.
The posi i e ela ionship be ween
p o i abili y and co po a e cash holdings
was explained by he pecking o de heo y.
The company elies on he achie ed p o i s
o inc ease he le el o hei cash holdings,
e en hough main aining he op imal le el
o cash should be independen o cash lows
gene a ed in e nally. The le el o he company’s
p o i abili y is a i al aspec when making
inancial decisions. Analyzing he cash holdings
de e minan s o F ench companies o he ime
pe iod o 1998 o 2002, Saddou (2006) ound
ha cash holdings can be enhanced due o
inc eased p o i abili y, bea ing in mind ha cash
low is an indica o o a company’s p o i abili y.
Mo e p o i able companies a e capable o
paying di idends o sha eholde s, se le deb s
and holding mo e cash in o de o a oid any
ci cums ances ha migh h ea en hei liquidi y
(Al-Najja & Belghi a , 2011). The company,
which dis ibu es a di idend, can educe i s
cash holdings gi en ha , in he ci cums ances
o a cash sho all, he company can cu he
di idend.
Al-Ama neh (2015) analyzed he impac
o p o i abili y on cash holdings o Jo danian
companies lis ed a he Amman S ock Exchange
o he ime pe iod o 2001 o 2011. He ound ha
be o e he inancial c isis, he e was a nega i e
e ec , as dic a ed by he equi emen s o he
ade-o heo y. On he o he hand, du ing he
inancial c isis, he e ec o p o i abili y on cash
holdings changed o posi i e, as sugges ed by
he pecking o de heo y, since in e nal sou ces
we e he main sou ce o inancing.
Taking in o conside a ion all p e ious
esea ch and speci ically he esea ch
conduc ed by Shabbi e al. (2016), he
esea ch seeks o p o ide an answe o he
ollowing ques ion:
Wha is he impac o he p o i abili y on he
cash holdings?
1.5 Tangibili y o Asse s
The a io o ixed asse s o o al asse s shows
he olume o he company’s asse s ha
a e used as colla e al. The high alue o his
a io indica es an ac i e in es men policy.
I ep esen s he le el o capi al in es men
in echnical and p oduc i e in as uc u e. In
case o a cash sho age, he company can
sell hose asse s, so one expec s a nega i e
ela ionship be ween asse angibili y and cash
holdings, which alls unde he pecking o de
heo y. Companies wi h a highe olume o
colla e al also end o ha e less ouble when
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136 2022, XXV, 1
Finance
issuing deb s, which does no c ea e he need o
accumula ing a la ge olume o cash. Likewise,
angible asse s p o ide a ce ain le el o secu i y,
gi en ha he asse s can be sold in he e en o
inancial dis ess. The company ha has a la ge
olume o easily liquida ed asse s used as
colla e al will hold less cash in o de o ha e lowe
oppo uni y liquidi y cos s. Bayyu and Nizae a
(2016) analyzed he key ac o s o co po a e
cash holdings o 164 manu ac u ing Tu kish
companies o e he pe iod o 2003 o 2013.
Ob ained esul s showed ha companies wi h
a high alue o angible asse s do no hold high
amoun s o cash, as hey can easily sell hese
asse s when hey need money. Howe e , he
ade-o heo y p edic ed a posi i e ela ionship
be ween asse angibili y and cash holdings,
which was con i med in esea ch wo ks by Na es
e al. (2017), and Thu and Khuong (2018).
Jeb an e al. (2019) analyzed he ac o s
de e mining he co po a e cash holdings policy
o 280 companies lis ed on he Pakis an S ock
Exchange o he pe iod o 2005 o 2014.
The esul s emphasized ha asse angibili y
had a signi ican and nega i e e ec on cash
holdings in he p e-c isis, c isis, as well as he
pos -c isis pe iods, bu he le el o signi icance
was highe in he p e-c isis han in he pos -c isis
pe iod. I can hus be s a ed ha he inancial
c isis did ac ually in luence he signi icance
le el o angibili y on cash holdings.
Based on all esea ch desc ibed abo e, in
pa icula he esea ch wo ks o D obe z and
G uninge (2007), and Uya and Kuzey (2014),
he ollowing ques ion was posed:
Wha is he impac o he angibili y o
asse s on he cash holdings?
2. Resea ch Me hodology
In o de o analyze he majo indica o s o
cash holdings managemen o companies in
he wholesale indus y, he au ho s used he
panel eg ession analysis. The sample was
s uc u ed by ac i i y code and consis ed o
all ac i e la ge and e y la ge companies (106
companies) and a se ies o ou yea s (2014–
2017) in he ollowing en Balkan coun ies:
G eece, Albania, Bulga ia, Slo enia, Romania,
Macedonia, C oa ia, Bosnia and He zego ina,
Se bia and Mon eneg o. The esea ch
co e ed 57 la ge and 49 e y la ge wholesale
companies acco ding o he ca ego y o he
company based on da a om he TP Ca alys
da abase (Bu eau an Dijk, A Moody’s Analy ics
Company, 2018). The obse ed a iables could
be calcula ed only in he pe iod om 2014 o
2017 based on he a ailable inancial da a in
he balance shee and income s a emen , which
can be ound in he TP Ca alys da abase.
These da abase limi a ions in luenced sample
selec ion and analyzed indica o s.
The cash holdings a io was aken as he
dependen a iable, while company size,
le e age, non-cash liquid asse s, p o i abili y
and angibili y we e conside ed as independen
a iables. All implemen ed indica o s we e
p esen ed in Tab. 1, elying on he me hod o
calcula ion used in he esea ch conduc ed by
Saddou (2006), D obe z and G üninge (2007),
Ga cía-Te uel and Ma ínez-Solano (2008),
Uya (2014), Al-Ama neh (2015), Bayyu and
Nizae a (2016), Na es e al. (2017), Thu and
Khuong (2018), Jeb an e al. (2019).
Indica o s Me hod o calcula ion Expec ed e ec s on
cash holdings
Cash holdings Cash and cash equi alen s/
To al asse s
Company size Log o o al asse s Nega i e (−)
Le e age To al liabili ies/To al asse s Nega i e (−)
Non-cash liquid asse s (Ne wo king capi al-cash and cash
equi alen s)/To al asse s Nega i e (−)
P o i abili y (ROA) Ne income/To al asse s Posi i e (+)
Tangibili y o asse s Ne ixed asse s/To al asse s Nega i e (−)
Sou ce: own
Tab. 1: Cash holdings indica o s
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137
1, XXV, 2022
Finance
Acco ding o he desc ip i e s a is ics
displayed in Tab. 2; he a e age alue o he
cash holdings a io was 0.13 wi h a alue
dispe sion om −0.10 o 0.95. Acco dingly,
cash and cash equi alen s accoun ed o
only 13% o he company’s o al asse s. The
a e age alue o he company size was 8.37.
The disc epancy in company size a ied om
a minimum alue o −1.81 o a maximum alue
o 11.28. Le e age had an a e age alue o
0.32 which was below he e e ence alue o
0.5. I showed a signi ican alue dispe sion
om −13.33 o 71.43. The e we e companies
unded on a la ge scale by hei own sou ces
and also companies ha we e able o ake
g ea e inancial isks. The a e age alue o
non-cash liquid asse s indica o was 0.08 wi h
small a ia ions in alue om −2.37 o 1.08.
The a e age alue o he e u n on asse s as
a p o i abili y indica o was 8.63%, which was
close o he e e ence alue (≥10%). ROA
demons a ed signi ican alue dispe sion om
−93.75 o 85.41. On he one hand, he e we e
non-p o i companies in he sample, while on
he o he , he e we e companies wi h e y high
e u ns on engaged asse s in he gi en ime
pe iod. The a e age alue o asse s angibili y
was 0.20, wi h a small dispe sion o alue om
0 o 1. Thus, he sample included companies
ha had al eady in es ed in a eas which ailed
o b ing in e enue as well as companies
wi h a la ge olume o ixed asse s and low-
le el managemen e iciency consequen ly.
Fo he desc ip i e s a is ics o dependen
and independen a iables o he de eloped
models, see Tab. 2 below.
In o de o gi e he answe s on he
esea ch ques ions a panel da a analysis will be
conduc ed. Based on he esea ch conduc ed
by Ali and Yousa (2013), Bayyu and Nizae a
(2016), Jeb an e al. (2019), he ollowing
o mula was o mula ed:
CHRi = β0 + β1CSi + β2LEVi +
+ β3NCLAi + β4ROAi + β5TAi + Ei (1)
whe e:
CHRi – dependen a iable;
β0 – model cons an ;
βi – independen a iable coe icien s;
CS, LEV, NCLA, ROA, TA – independen o
explana o y a iables;
CSi , LEVi , NCLAi , ROAi , TAi – 1 × k ec o o
obse a ions on he explana o y a iables;
E – e o wi h a no mal dis ibu ion;
i – indica es each company (i = 1, ..., N);
– indica es he ime pe iod ( = 1, ..., ).
In o de o es whe he is app op ia e OLS
o eg ession model, F- es will be conduc ed.
Fu he mo e, in o de o choose an adequa e
model be ween ixed-e ec s model and
andom-e ec s model, Hausman es will be
ealized.
3. Resea ch Resul s
Tab. 3 con ains he co ela ion analysis o he
used a iables. As po ayed in Tab. 3, none
o he co ela ions app oxima e he h eshold
alue o 0.8, hus leading o he conclusion ha
he e is no p oblem wi h mul icollinea i y.
In o de o analyze mul icollinea i y, he
a iance impac ac o s (VIF) we e calcula ed
o all independen a iables. The esul s,
summed up in Tab. 4, highligh ed ha he e
was no p oblem wi h mul icollinea i y due o he
Va iable Mean S d. de . Min Max
Cash holdings a io 0.1299686 0.1804468 −0.1035765 0.9463549
Size 8.375496 1.639388 −1.809372 11.28174
Le e age 0.3173571 3.791134 −13.33333 71.42857
Non-cash liquid asse s 0.0814776 0.4579704 −2.365621 1.082933
ROA 8.633663 16.86324 −93.75 85.41374
Asse s angibili y 0.2000721 0.2598416 0 0.9968474
Sou ce: own
Tab. 2: Desc ip i e s a is ics
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138 2022, XXV, 1
Finance
Cash
holdings
a io
Size Le e age
Non cash
liquid
asse s
ROA Asse s
angibili y
Cash holdings a io 1.0000
Size −0.3885 1.0000
Le e age −0.0124 −0.0066 1.0000
Non-cash liquid asse s −0.1229 0.1990 −0.0352 1.0000
ROA 0.1492 −0.0097 −0.0346 0.4040 1.0000
Asse s angibili y 0.1043 0.0623 −0.0448 0.0370 −0.0022 1.0000
Sou ce: own
Va iable VIF 1/VIF
Non-cash liquid asse s 1.26 0.794609
ROA 1.21 0.827730
Size 1.05 0.947880
Asse s angibili y 1.01 0.993384
Le e age 1.00 0.996330
Mean VIF 1.11
Sou ce: own
Cash holdings a io Coe . S d. e . p > | | [95% con . in e al]
Size −0.0297922 0.0055813 −5.34 0.000 −0.0407739 −0.0188105
Le e age 0.0006552 0.0015097 0.43 0.665 −0.0023152 0.0036256
Non-cash liquid asse s −0.1231933 0.0213631 −5.77 0.000 −0.1652266 −0.0811599
ROA 0.0018968 0.0004854 3.91 0.000 0.0009417 0.0028518
Asse s angibili y 0.0021304 0.0294243 0.07 0.942 −0.055764 0.0600249
cons 0.3725203 0.0471741 7.90 0.000 0.2797019 0.4653387
R-sq: wi hin = 0.2180
be ween = 0.1229
o e all = 0.1505
F(5,313) = 17.45
P ob > F = 0.0000
Hausman es
chi2(5) = (b–B)'[(V_b–V_B) ^ (–1)](b–B) = 14.88
P ob > chi2 = 0.0109
Sou ce: own
Tab. 3: Co ela ion ma ix
Tab. 4: Va iance impac ac o s o a iables (VIF)
Tab. 5: Dependen a iable: cash holdings a io
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