Determinants of cash holding in South Africa: evidence from non financial firms

SOURCE: African Review of Economics and Finance
OUTPUT TYPE: Journal Article
PUBLICATION YEAR: 2019
TITLE AUTHOR(S): A.Kasongo
KEYWORDS: CASH HOLDING, FINANCIAL MANAGEMENT, GROWTH OPPORTUNITIES
DEPARTMENT: Center for Science, Technology and Innovation Indicators (CESTII)
Print: HSRC Library: shelf number 11177
HANDLE: 20.500.11910/15116
URI: http://hdl.handle.net/20.500.11910/15116

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Abstract

Cash holding is one of the most significant components of a firms current assets. The benefit of holding cash revolves around choosing the optimal timing of investment and avoiding under-price issues. This paper investigates the determinants of corporate cash holding of 80 non-financial firms in South Africa between 2007 and 2017. The Arellano-Bover/Blundell-Bond generalized method of moments (GMM) estimates indicate that leverage, firms growth opportunity, business confidence, economic growth and political stability have a negative effect on cash holdings, whereas debt maturity and cashflow exerts a positive influence. Other factors such as firm size, dividends payments, inflation rate and financial crises have an insignificant impact on company cash holdings.