The Determinants of Cash Holdings around Different Regions of the World

Abstract

This paper analyzes cash holding determinants around different regions of the world including Asia Pacific, Europe, Africa, North America, Middle East and South America. The sample consists of 5,957 companies from 47 countries grouped into six regions for the period from 2007 to 2016.Panel Generalized Method of Moments is applied to account for endogeneity in the independent variables. The study is conducted in two phases: In the first stage, model is run for all the companies where results of the analysis show that size, financial strength, investments and cash flows are positively and significantly related to cash holdings for the companies in the sample and leverage, dividend, intangibles, market to book ratio, profitability and net working capital have significant negative effect on cash holdings. In the second phase, model is run separately for each region. The results show some deviations across the regions, which indicate differences of institutional frameworks in different countries present in different regions of the world. The study is of immense importance for the international managers and academic researchers in analyzing cash holding determinants in different regions having varying institutional and governance settings.