Title: Corporate cash holdings and financial crisis: evidence from the emerging market of Greece

Authors: Efstathios Magerakis

Addresses: Department of Economics, University of Patras, University Campus, 26504 Rio, Achaia, Greece

Abstract: This paper investigates the determinants and implications of cash holdings during both a recessionary and a growth phase of the Greek economy. Using a sample from 2003 to 2014, we find that, on average, Greek firms hold 13.8% of their total assets as cash and cash equivalents. We build upon the theoretical underpinnings of cash holdings determinants and provide evidence generally supportive of both a static trade-off model and pecking order model. The empirical results indicate that the cash ratio is positively associated with cash flow to assets, capital expenditures, industry cash flow volatility, and dividend payment. In contrast, corporate leverage, net working capital ratio, firm size, and loss are negatively related to cash ratio. This study highlights the importance of formulating additional regulatory actions and accounting policies to shield markets from a looming global shock.

Keywords: cash holdings; cash determinants; trade-off theory; pecking order theory; precautionary motive; financial crisis; emerging markets; Greece; panel data; GMM estimator; Greece.

DOI: 10.1504/IJMFA.2020.109139

International Journal of Managerial and Financial Accounting, 2020 Vol.12 No.2, pp.186 - 215

Received: 28 Oct 2019
Accepted: 08 Apr 2020

Published online: 21 Aug 2020 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article