DETERMINANTS OF CASH HOLDINGS: EVIDENCE FROM BALKAN COUNTRIES

130 2022, XXV, 1 Finance 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 EM_1_2022.indd 130 23.3.2022 9:36:39 131 1, XXV, 2022 Finance 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: EM_1_2022.indd 131 23.3.2022 9:36:39 132 2022, XXV, 1 Finance 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 EM_1_2022.indd 132 23.3.2022 9:36:39 133 1, XXV, 2022 Finance 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 EM_1_2022.indd 133 23.3.2022 9:36:39 134 2022, XXV, 1 Finance 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 EM_1_2022.indd 134 23.3.2022 9:36:40 135 1, XXV, 2022 Finance 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 EM_1_2022.indd 135 23.3.2022 9:36:40 136 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 EM_1_2022.indd 136 23.3.2022 9:36:40 137 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 EM_1_2022.indd 137 23.3.2022 9:36:40 138 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 EM_1_2022.indd 138 23.3.2022 9:36:40