Asian Review of Financial Research

pISSN: 1229-0351
eISSN: 2713-6531

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The Determinants of Corporate Cash Holdings ×
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Asian Review of Financial Research Vol.19 No.1 pp.1-41
The Determinants of Corporate Cash Holdings
Jaisik Gong1†
1 대구대학교 보험금융학과 교수
Key Words : 현금보유수요; 거래비용; 정보비대칭; 대리인비용

Abstract

This paper investigates the empirical determinants of corporate cash holdings for a sample of Korean firms over the period 1991-2004. We find that the level of cash holdings is significantly affected by the growth and investment opportunity set, debt, firm size, dividends, net working capital, investment expenditure and cash flows. Firms with strong growth opportunities and larger amounts of cash flows show high ratios of cash holdings. Small firms hold higher levels of cash holdings because they are more likely to experience financial distress. We also find that the level of cash holdings has the negative relation with debt, intangible assets, and investment expenditure. Firms with higher dividend ratios have higher cash holdings.Our results show that levels of managerial ownership represented by the largest shareholder's portion exert a significant and positive influence on cash holdings of Korean firms in the pre-IMF crisis period. This suggests that Korean firms had severe agency problems and higher managerial perk incentives in the pre-IMF crisis period. Chaebul firms which are a member of Chaebul business group, hold lower levels of cash holdings due to the availability of their internal capital markets. Cash flow variability and R&D variables show mixed results.
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