Firm Size Does Matter: New Evidence on the Determinants of Cash Holdings
Abstract
:1. Introduction
2. Theoretical and Empirical Background
3. Variable Measurement and Research Design
3.1. Variable Measurements
3.2. Research Design
4. Data, Sample Selection, and Descriptive Statistics
4.1. Data and Sample Selection
4.2. Descriptive Statistics
5. Main Results
5.1. Determinants of Cash Holdings
5.2. Small, Medium, and Large-Sized Firms
6. Additional Analyses
6.1. Ownership, Board Structure, and Cash Holdings
6.2. Cross-Sectional Tests
6.3. Two-Step System GMM Estimation
6.4. Analysis in Alternative Periods
6.5. Different Firm Size Proxies
7. Conclusions
Author Contributions
Funding
Acknowledgments
Conflicts of Interest
Appendix A
Name | Definition |
---|---|
CASH | Cash and cash equivalents to total assets; |
SIZE | Natural logarithm of total assets |
CF | Cash flow (pre-tax profits + depreciation + amortization) scaled by total sales |
LEV | Total debt (short-term debt + long-term debt) to total assets |
NWC | Current assets−current liabilities−cash and cash equivalents to total assets |
DEBTMT | Long-term debt to total liabilities |
CAPEX | Change of fixed assets plus depreciation and amortization to total assets |
XRD | Ratio of research and development expenses to sales |
INDSIGMA | Mean of Σ(CF/total assets) for firms in the same industry |
MTB | Total assets−common shareholders equity-market capitalization fiscal period end scaled by total assets |
RSPREAD | Gross operating profit/assets−interest rate 1-Yr T-Bills |
INT | Interest rate 1-Yr T-Bills |
GDPGR | Gross Domestic Product (GDP) percentage change on previous year |
MAN | Total percentage of equity ownership by company directors |
BOARDNB | Number of the members of the board |
CEO_COB | Dummy variable which takes a value of 1 if the positions of the CEO and the COB are held by the same individual and 0 otherwise |
L.CASH | Lagged cash and cash equivalents to total assets |
SIZEDUMMY | Binary variable, which takes the value one (zero) for firms where SIZE is above (below) the sample’s median |
SMALLvsLARGE | Binary variable, which takes the value one for large firms (SIZE ≥ p75) and zero for small firms (SIZE ≤ p25) |
MEDIUMvsLARGE | Binary variable, which takes the value one for large firms (SIZE ≥ p75) and zero for medium firms (p25 < SIZE < p75) |
HHI | Herfindahl-Hirschman Index computed using firm sales for each three-digit industry codes for every year in the sample. First, the sales ratio is computed by dividing sales of each firm to the total sales in the 3-digit code industry. Second, HHI is computed as the sum of the squares of the ratio for all firms in the same industry |
ALTMAN | Altman’s Z-Score provided by the Amadeus database |
AGE | Years since the date of foundation |
SIZENA | Natural logarithm of total assets minus cash and cash equivalents |
SIZE1 | Natural logarithm of total firm sales |
SIZE2 | Natural logarithm of market value of equity |
Appendix B
Panel A: Summary Statistics | ||||||||
Mean | Std. Dev. | Min | Max | N | ||||
ASSETS (mil. £) | 2477.459 | 14,505.045 | 9.990 | 332,160.992 | 6629 | |||
NET_ASSETS (mil. £) | 1609.543 | 6056.685 | 0.011 | 45,904.000 | 6629 | |||
SALES (mil. £) | 1257.501 | 4294.122 | 0.012 | 30,758.000 | 6629 | |||
MVE (mil. £) | 1957.864 | 8128.579 | 0.000 | 115,094.496 | 6024 | |||
SIZE | 11.540 | 2.440 | 4.892 | 17.645 | 6629 | |||
SIZENA | 11.309 | 2.583 | 3.497 | 17.582 | 6629 | |||
SIZE1 | 11.018 | 2.896 | 2.485 | 17.242 | 6629 | |||
SIZE2 | 11.681 | 2.399 | 6.732 | 17.566 | 6024 | |||
Panel B: Correlation | ||||||||
V1 | V2 | V3 | V4 | V5 | V6 | V7 | V8 | |
V1: ASSETS | 1 | 0.993 *** | 0.917 *** | 0.914 *** | 1.000 *** | 0.993 *** | 0.917 *** | 0.915 *** |
V2: NET_ASSETS | 0.794 *** | 1 | 0.921 *** | 0.893 *** | 0.993 *** | 1.000 *** | 0.921 *** | 0.893 *** |
V3: SALES | 0.756 *** | 0.920 *** | 1 | 0.845 *** | 0.917 *** | 0.921 *** | 1.000 *** | 0.845 *** |
V4: MVE | 0.833 *** | 0.866 *** | 0.818 *** | 1 | 0.914 *** | 0.893 *** | 0.845 *** | 1.000 *** |
V5: SIZE | 0.367 *** | 0.535 *** | 0.551 *** | 0.468 *** | 1 | 0.993 *** | 0.917 *** | 0.915 *** |
V6: SIZENA | 0.357 *** | 0.521 *** | 0.537 *** | 0.454 *** | 0.991 *** | 1 | 0.921 *** | 0.893 *** |
V7: SIZE1 | 0.312 *** | 0.453 *** | 0.503 *** | 0.401 *** | 0.886 *** | 0.893 *** | 1 | 0.845 *** |
V8: SIZE2 | 0.361 *** | 0.518 *** | 0.538 *** | 0.479 *** | 0.919 *** | 0.895 *** | 0.809 *** | 1 |
Appendix C
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1 | Regarding the agency costs, we use the definition given by Fama and Jensen (1983): “the costs of structuring, monitoring, and bonding a set of contracts among agents with conflicting interests, plus the residual loss incurred because the cost of full enforcement of contracts exceeds the benefits”. |
2 | |
3 | Following Denis and Mcconnell (2003), we define corporate governance as “the set of mechanisms—both institutional and market-based—that induce the self-interested controllers of a company (those that make decisions regarding how the company will be operated) to make decisions that maximize the value of the company to its owners (the suppliers of capital)”. |
4 | A relevant variable missing from the analysis is dividends paid in the fiscal year to assets or a dummy variable taking the value of one when a firm distributes dividends in the fiscal year, and zero otherwise (Ozkan and Ozkan 2004); the Amadeus database does not report the relevant financial data for the calculations. However, Ozkan and Ozkan (2004) find that dividend payout has a no significant influence on corporate cash holdings in the UK case. |
5 | Wilkins (2018) suggests that the exclusion of lagged dependent variables (LDVs) could result in biased estimates. In other words, LDVs should largely be considered as a robustness check by studies. Keele and Kelly (2006) argue that if history matters, which stands for most cases in economics where most processes are dynamic, then the LDV model is the most appropriate technique. |
6 | Since T is fairly small in our analysis (nine years), the specification should not lead to biased coefficients. As stated by the previous literature (Chamberlain 1984; Nickell 1981), a dynamic model introduces correlation between the lagged dependent variable and time-averaged error term; the estimation problem is highly dependent on the number of years. |
7 | We thank an anonymous reviewer for this suggestion. |
8 | Amadeus (Analyse Major Database from European Sources), compiled by Bureau Van Dijk Electronic Publishing (BvDEP), is a dataset that comprises financial information for public and private European companies. See www.bvdinfo.com. |
9 | We also run power calculations to overcome potential issues regarding the validity of our findings, which confirm that the sample size of the study is adequate to provide results with the desired power and significance. See Appendix C for further discussion. |
10 | We thank an anonymous reviewer for this suggestion. |
Variable | Prediction | Trade-off Theory (TOT) | Pecking Order Theory (POT) | Free Cash Flow Hypothesis (FCF) |
---|---|---|---|---|
Cash Flow (CF) | − | − | + | n.a. |
Leverage (LEV) | − | −/+ | − | − |
Debt maturity (LEV) | − | −/+ | − | − |
Net working capital (NWC) | − | − | n.a. | n.a. |
Firm size (SIZE) | − | − | + | + |
Capital expenditures (CAPX) | − | − | + | n.a. |
R&D (XRD) | + | − | + | n.a. |
Industry sigma (INDSIGMA) | + | + | + | n.a. |
Market to Book ratio (MTB) | + | + | + | − |
Opportunity cost of holding liquid assets (RSPREAD) | ? | + | n.a. | n.a. |
Panel A: By Year | |||||
Year | Number of Firms | Percentage (%) | Year | Number of Firms | Percentage (%) |
2010 | 677 | 10.21 | 2015 | 824 | 12.43 |
2011 | 706 | 10.65 | 2016 | 857 | 12.93 |
2012 | 724 | 10.92 | 2017 | 869 | 13.11 |
2013 | 759 | 11.45 | 2018 | 411 | 6.20 |
2014 | 802 | 12.10 | Total | 6629 | 100.00 |
Panel B: By Industry | |||||
No | Description of Industry | Number of Firms | Percentage (%) | ||
1 | Consumer Non-durables: Food, Tobacco, Textiles, Apparel, Leather, Toys | 467 | 7.05 | ||
2 | Consumer Durables: Cars, TV’s, Furniture, Household Appliances | 105 | 1.58 | ||
3 | Manufacturing: Machinery, Trucks, Planes, Off Furn, Paper, Com Printing | 470 | 7.09 | ||
4 | Oil, Gas, and Coal Extraction and Products | 390 | 5.88 | ||
5 | Chemicals and Allied Products | 183 | 2.76 | ||
6 | Business Equipment: Computers, Software, and Electronic Equipment | 887 | 13.37 | ||
7 | Telephone and Television Transmission | 229 | 3.46 | ||
8 | Wholesale, Retail, and Some Services (Laundries, Repair Shops) | 890 | 13.43 | ||
9 | Healthcare, Medical Equipment, and Drugs | 248 | 3.74 | ||
10 | Other: Mines, Constr, BldMt, Trans, Hotels, Bus Serv, Entertainment | 2760 | 41.64 | ||
Total | 6629 | 100.00 |
Variable | Mean | Std. Dev. | Min | 25% | Median | 75% | Max | Obs. |
---|---|---|---|---|---|---|---|---|
CASH | 0.168 | 0.187 | 0.001 | 0.043 | 0.096 | 0.222 | 0.927 | 6629 |
CF | 0.004 | 0.286 | −1.869 | −0.002 | 0.074 | 0.129 | 0.398 | 6629 |
LEV | 0.172 | 0.208 | 0.000 | 0.001 | 0.117 | 0.263 | 1.400 | 6629 |
NWC | −0.009 | 0.238 | −1.514 | −0.101 | −0.004 | 0.099 | 0.641 | 6629 |
SIZE | 11.540 | 2.440 | 4.892 | 9.709 | 11.352 | 13.209 | 17.645 | 6629 |
CAPX | 0.023 | 0.190 | −1.036 | −0.017 | 0.010 | 0.074 | 0.603 | 6629 |
XRD | 0.082 | 0.441 | 0.000 | 0.000 | 0.000 | 0.004 | 4.018 | 6629 |
INDSIGMA | 0.087 | 0.046 | 0.002 | 0.046 | 0.096 | 0.122 | 0.278 | 6629 |
MTB | 2.095 | 2.212 | 0.361 | 1.034 | 1.474 | 2.294 | 20.353 | 6035 |
RSPREAD | −0.529 | 0.779 | −23.999 | −0.623 | −0.425 | −0.283 | 37.321 | 6610 |
V1 | V2 | V3 | V4 | V5 | V6 | V7 | V8 | V9 | V10 | |
---|---|---|---|---|---|---|---|---|---|---|
V1: CASH | 1 | −0.090 *** | −0.479 *** | −0.007 | −0.339 *** | −0.072 *** | 0.155 *** | 0.138 *** | 0.343 *** | −0.110 *** |
V2: CF | −0.308 *** | 1 | 0.028 * | 0.097 *** | 0.374 *** | 0.149 *** | −0.005 | −0.184 *** | 0.192 *** | 0.528 *** |
V3: LEV | −0.291 *** | −0.094 *** | 1 | −0.231 *** | 0.379 *** | 0.021 | −0.130 *** | −0.120 *** | −0.130 *** | 0.041 ** |
V4: NWC | −0.052 *** | 0.270 *** | −0.342 *** | 1 | −0.000 | −0.027 * | 0.115 *** | −0.129 *** | −0.081 *** | 0.141 *** |
V5: SIZE | −0.373 *** | 0.437 *** | 0.199 *** | 0.108 *** | 1 | 0.090 ** | −0.104 *** | −0.232 *** | −0.117 *** | 0.352 *** |
V6: CAPX | −0.106 *** | 0.219 *** | −0.063 *** | 0.069 *** | 0.102 *** | 1 | 0.009 | 0.022 | 0.148 *** | 0.137 *** |
V7: XRD | 0.342 *** | −0.268 *** | −0.096 *** | 0.026 * | −0.155 *** | −0.006 | 1 | 0.025 * | 0.234 *** | −0.082 *** |
V8: INDSIGMA | 0.171 *** | −0.208 *** | −0.063 *** | −0.152 *** | −0.220 *** | −0.001 | 0.117 *** | 1 | 0.060 *** | −0.168 *** |
V9: MTB | 0.336 *** | −0.359 *** | 0.049 *** | −0.237 *** | −0.242 *** | −0.002 | 0.230 *** | 0.096 *** | 1 | 0.055 *** |
V10: RSPREAD | −0.115 *** | 0.516 *** | −0.055 *** | 0.212 *** | 0.243 *** | 0.173 *** | −0.123 *** | −0.107 *** | −0.165 *** | 1 |
VIF | 1.91 | 1.26 | 1.27 | 1.42 | 1.07 | 1.15 | 1.10 | 1.23 | 1.35 |
First Quartile | Second Quartile | Third Quartile | Forth Quartile | t-Stat. (p-Value) | |
---|---|---|---|---|---|
Range CASH | 0.001 | 0.043 | 0.096 | 0.222 | |
0.043 | 0.096 | 0.222 | 0.927 | ||
CASH | 0.021 | 0.067 | 0.150 | 0.433 | −88.17 |
[0.021] | [0.068] | [0.143] | [0.370] | (0.00) | |
CF | 0.034 | 0.053 | 0.038 | −0.110 | 12.36 |
[0.075] | [0.078] | [0.083] | [0.042] | (0.00) | |
LEV | 0.243 | 0.219 | 0.148 | 0.077 | 24.57 |
[0.218] | [0.195] | [0.083] | [0.000] | (0.00) | |
NWC | −0.021 | 0.010 | 0.006 | −0.032 | 1.24 |
[−0.014] | [0.001] | [0.006] | [−0.007] | (0.21) | |
SIZE | 12.154 | 12.461 | 11.464 | 10.083 | 27.05 |
[12.107] | [12.448] | [11.258] | [9.941] | (0.00) | |
CAPX | 0.031 | 0.036 | 0.028 | −0.005 | 5.27 |
[0.017] | [0.016] | [0.013] | [0.000] | (0.00) | |
XRD | 0.012 | 0.019 | 0.036 | 0.259 | −12.27 |
[0.000] | [0.000] | [0.000] | [0.000] | (0.00) | |
INDSIGMA | 0.082 | 0.085 | 0.086 | 0.097 | −9.87 |
[0.075] | [0.087] | [0.089] | [0.109] | (0.00) | |
MTB | 1.502 | 1.681 | 1.998 | 3.246 | −18.65 |
[1.206] | [1.337] | [1.528] | [2.210] | (0.00) | |
RSPREAD | −0.495 | −0.462 | −0.505 | −0.653 | 4.83 |
[−0.408] | [−0.400] | [−0.405] | [−0.520] | (0.00) |
Dependent Variable: CASH | ||||||
---|---|---|---|---|---|---|
Variables | (1) | (2) | (3) | (4) | (5) | (6) |
L.CASH | 0.730 *** | |||||
(66.68) | ||||||
SIZE | −0.014 *** | −0.014 *** | −0.022** | −0.014 *** | −0.014 *** | −0.005 *** |
(−6.92) | (−6.93) | (−3.06) | (−6.87) | (−17.26) | (−6.13) | |
CF | −0.075** | −0.078 *** | 0.061 | −0.051 ** | −0.083 *** | 0.051 *** |
(−3.31) | (−3.40) | (1.84) | (−2.41) | (−4.18) | (6.80) | |
LEV | −0.256 *** | −0.251 *** | −0.255 *** | −0.254 *** | −0.276 *** | −0.113 *** |
(−7.69) | (−7.39) | (−4.94) | (−7.97) | (−14.95) | (−6.01) | |
NWC | −0.041 | −0.037 | −0.181 ** | −0.035 | −0.064 *** | −0.051 *** |
(−1.65) | (−1.47) | (−2.77) | (−1.44) | (−5.85) | (−4.41) | |
DEBTMT | 0.012 | 0.007 | 0.076 * | 0.012 | 0.017 | 0.038 ** |
(0.60) | (0.36) | (2.18) | (0.62) | (1.51) | (3.14) | |
CAPX | −0.090 *** | −0.092 *** | −0.101 *** | −0.084 *** | −0.092 *** | −0.161 *** |
(−8.06) | (−7.43) | (−5.65) | (−7.63) | (−7.36) | (−12.81) | |
XRD | 0.085 *** | 0.086 *** | 0.025 *** | 0.085 *** | 0.102 *** | 0.033 *** |
(7.45) | (7.31) | (5.73) | (7.66) | (14.28) | (6.14) | |
INDSIGMA | 0.328 ** | 0.347 | 0.296 ** | 0.393 *** | 0.122 *** | 0.172 ** |
(2.89) | (1.54) | (3.31) | (3.78) | (6.04) | (2.98) | |
MTB | 0.017 *** | 0.016 *** | 0.007 * | 0.017 *** | 0.019 *** | 0.006 *** |
(7.54) | (7.47) | (2.05) | (7.94) | (10.13) | (4.79) | |
INT | 0.011 | |||||
(0.52) | ||||||
GDPGR | 0.006 | |||||
(1.25) | ||||||
RSPREAD | 0.018 *** | 0.018 *** | 0.005 | 0.023 ** | −0.005 | |
(4.68) | (4.72) | (1.29) | (2.72) | (−0.64) | ||
Year FE | Yes | No | Yes | No | No | No |
Industry FE | Yes | No | No | No | No | No |
Industry × Year FE | No | Yes | No | No | No | No |
Firm FE | No | No | Yes | Yes | No | Yes |
N | 6021 | 5935 | 5963 | 6034 | 6022 | 5062 |
Adj. R2 | 0.375 | 0.347 | 0.746 | 0.370 | 0.363 | 0.736 |
Dependent Variable: CASH | ||||||
---|---|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) | (6) | |
Variables | Full Sample | Full Sample | Full Sample | Small Firms Only | Medium Firms Only | Large Firms Only |
SIZEDUMMY | −0.030 *** | |||||
(−3.38) | ||||||
SMALL vs. LARGE | −0.105 *** | |||||
(−5.87) | ||||||
MEDIUM vs. LARGE | −0.018 * | |||||
(−2.19) | ||||||
CF | −0.113 *** | −0.074 *** | −0.080 * | −0.084 *** | −0.074 | −0.049 |
(−5.21) | (−3.48) | (−2.14) | (−3.71) | (−1.63) | (−1.27) | |
LEV | −0.251 *** | −0.284 *** | −0.170 *** | −0.372 *** | −0.219 *** | 0.006 |
(−7.28) | (−6.82) | (−4.97) | (−6.33) | (−4.49) | (0.16) | |
NWC | −0.035 | −0.019 | −0.073 *** | −0.017 | −0.065 ** | −0.086 ** |
(−1.40) | (−0.63) | (−3.58) | (−0.42) | (−2.40) | (−3.22) | |
DEBTMT | −0.022 | 0.057 * | −0.049 ** | 0.112 * | −0.062 ** | −0.090 *** |
(−1.10) | (2.29) | (−2.50) | (2.12) | (−2.41) | (−3.75) | |
CAPX | −0.091 *** | −0.092 *** | −0.080 *** | −0.105 *** | −0.084 *** | −0.075 ** |
(−7.72) | (−4.82) | (−6.39) | (−3.64) | (−5.41) | (−3.04) | |
XRD | 0.084 *** | 0.077 *** | 0.094 *** | 0.069 *** | 0.084 *** | 0.114 |
(7.26) | (5.98) | (4.97) | (5.10) | (4.21) | (1.11) | |
INDSIGMA | 0.355 ** | 0.398 ** | 0.210 * | 1.264 *** | 0.326 * | 0.070 |
(3.35) | (3.33) | (2.02) | (4.31) | (1.96) | (0.62) | |
MTB | 0.017 *** | 0.016 *** | 0.023 *** | 0.016 *** | 0.023 *** | 0.022 *** |
(7.66) | (7.20) | (6.74) | (7.46) | (6.19) | (4.74) | |
RSPREAD | 0.017 *** | 0.018 *** | −0.030 | 0.019 *** | −0.037 | 0.044 |
(4.96) | (6.05) | (−1.48) | (6.12) | (−1.65) | (1.23) | |
Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
Industry FE | Yes | Yes | Yes | Yes | Yes | Yes |
N | 6020 | 2989 | 4635 | 1385 | 3031 | 1603 |
Adj. R2 | 0.360 | 0.427 | 0.330 | 0.322 | 0.327 | 0.330 |
Dependent Variable: CASH | ||||||
---|---|---|---|---|---|---|
Variables | (1) | (2) | (3) | (4) | (5) | (6) |
L.CASH | 0.728 *** | 0.727 *** | 0.727 *** | |||
(55.89) | (55.63) | (56.80) | ||||
SIZE | −0.013 *** | −0.016 *** | −0.013 *** | −0.005 *** | −0.005 *** | −0.005 *** |
(−6.48) | (−5.75) | (−6.53) | (−6.15) | (−4.17) | (−5.62) | |
CF | −0.083 *** | −0.083 *** | −0.083 *** | 0.064 *** | 0.064 *** | 0.064 *** |
(−3.63) | (−3.62) | (−3.62) | (5.27) | (5.26) | (5.15) | |
LEV | −0.264 *** | −0.260 *** | −0.264 *** | −0.117 *** | −0.117 *** | −0.118 *** |
(−7.21) | (−7.20) | (−7.22) | (−7.29) | (−7.22) | (−7.29) | |
NWC | −0.045 | −0.045 | −0.045 | −0.052 *** | −0.052 *** | −0.052 *** |
(−1.71) | (−1.73) | (−1.72) | (−3.73) | (−3.78) | (−3.70) | |
DEBTMT | 0.012 | 0.012 | 0.013 | 0.037 *** | 0.037 *** | 0.037 *** |
(0.59) | (0.57) | (0.64) | (3.66) | (3.59) | (3.73) | |
CAPX | −0.090 *** | −0.090 *** | −0.090 *** | −0.162 *** | −0.162 *** | −0.162 *** |
(−7.70) | (−7.68) | (−7.73) | (−13.22) | (−13.25) | (−13.13) | |
XRD | 0.081 *** | 0.081 *** | 0.081 *** | 0.032 *** | 0.032 *** | 0.032 ** |
(6.72) | (6.71) | (6.71) | (3.64) | (3.74) | (3.39) | |
INDSIGMA | 0.304 ** | 0.302 ** | 0.304 ** | 0.177 ** | 0.176 ** | 0.177 ** |
(2.56) | (2.53) | (2.57) | (3.21) | (3.16) | (3.21) | |
MTB | 0.017 *** | 0.016 *** | 9.687 * | 0.006 *** | 0.006 *** | 1.583 |
(6.67) | (6.33) | (2.13) | (4.29) | (3.90) | (0.33) | |
RSPREAD | 0.017 *** | 0.017 *** | 0.017 *** | −0.014 | −0.014 | −0.014 |
(4.15) | (4.20) | (4.15) | (−1.67) | (−1.68) | (−1.62) | |
MAN | −0.409 ** | −0.385 ** | −0.035 | −0.049 | −0.048 | 0.009 |
(−2.72) | (−2.62) | (−0.15) | (−1.45) | (−1.32) | (0.05) | |
MAN2 | 0.006 ** | 0.005 ** | 0.000 | 0.001 | 0.001 | −0.000 |
(2.69) | (2.58) | (0.10) | (1.41) | (1.27) | (−0.08) | |
MAN3 | −0.000 ** | −0.000 ** | −0.000 | −0.000 | −0.000 | 0.000 |
(−2.66) | (−2.55) | (−0.06) | (−1.37) | (−1.22) | (0.09) | |
MTB × MAN | −0.418 * | −0.069 | ||||
(−2.10) | (−0.34) | |||||
MTB × MAN2 | 0.006 * | 0.001 | ||||
(2.06) | (0.34) | |||||
MTB × MAN3 | −0.000 * | −0.000 | ||||
(−2.00) | (−0.34) | |||||
CEO_COB | −0.020 | 0.001 | ||||
(−0.48) | (0.21) | |||||
BOARDN | 0.009 | 0.002 | ||||
(1.20) | (0.50) | |||||
Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
Industry FE | Yes | Yes | Yes | Yes | Yes | Yes |
N | 5635 | 5635 | 5635 | 4747 | 4747 | 4747 |
Adj. R2 | 0.372 | 0.372 | 0.372 | 0.731 | 0.731 | 0.731 |
Dependent Variable: CASH | ||||||
---|---|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) | (6) | |
Herfindahl–Hirschman Index | Altman Z-Score | Firm Age | ||||
Variables | Low industry rivalry (Above yearly HHI median) | High industry rivalry (Below yearly HHI median) | Strong balance sheet (Above yearly Median) | Weak balance sheet (Below yearly Median) | Young (<5 years from foundation date) | Mature (>5 years from foundation date) |
SIZE | −0.013 *** | −0.016 * | −0.014 *** | −0.009 *** | −0.019 ** | −0.014 *** |
(−6.62) | (−2.60) | (−4.96) | (−4.45) | (−2.57) | (−6.24) | |
CF | −0.075 ** | −0.056 | 0.131 | −0.112 *** | −0.077 | −0.057 ** |
(−3.19) | (−1.52) | (1.62) | (−5.18) | (−0.96) | (−2.59) | |
LEV | −0.280 *** | −0.182 * | −0.179 *** | −0.168 *** | −0.332 ** | −0.241 *** |
(−8.21) | (−2.21) | (−3.76) | (−4.32) | (−3.20) | (−6.38) | |
NWC | −0.055 | 0.006 | −0.095 *** | 0.012 | −0.174 * | −0.033 |
(−1.89) | (0.20) | (−3.85) | (0.32) | (−2.18) | (−1.27) | |
DEBTMT | 0.018 | 0.001 | −0.038 | 0.012 | −0.005 | 0.007 |
(0.85) | (0.04) | (−1.39) | (0.43) | (−0.06) | (0.32) | |
CAPX | −0.096 *** | −0.046 * | −0.124 *** | −0.046 ** | −0.142 *** | −0.087 *** |
(−7.54) | (−2.19) | (−5.75) | (−2.96) | (−4.38) | (−5.68) | |
XRD | 0.082 *** | 0.113 *** | 0.230 | 0.082 *** | 0.025 | 0.098 *** |
(7.10) | (14.79) | (1.70) | (8.15) | (0.97) | (8.95) | |
INDSIGMA | 0.336 ** | −0.033 | 0.057 | 0.112 | 0.767 * | 0.282 ** |
(2.83) | (−0.26) | (0.47) | (0.77) | (1.91) | (2.32) | |
MTB | 0.017 *** | 0.014 *** | 0.014 ** | 0.016 *** | 0.015 * | 0.016 *** |
(8.07) | (6.19) | (2.32) | (4.52) | (2.11) | (6.59) | |
RSPREAD | 0.018 *** | 0.003 | 0.016 *** | 0.020 ** | 0.022 | 0.017 *** |
(4.76) | (0.11) | (7.45) | (2.86) | (0.59) | (5.22) | |
Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
Industry FE | Yes | Yes | Yes | Yes | Yes | Yes |
N | 5036 | 976 | 2523 | 2748 | 622 | 5399 |
Adj. R2 | 0.376 | 0.360 | 0.346 | 0.353 | 0.376 | 0.389 |
Dependent Variable = CASH | ||
---|---|---|
(1) | (2) | |
Variables | Two-Step GMM | Two-Step GMM |
L.CASH | 0.428 *** | 0.375 *** |
(28.96) | (40.75) | |
SIZE | −0.015 *** | −0.016 *** |
(−3.54) | (−7.27) | |
CF | −0.002 | 0.083 *** |
(−0.18) | (12.98) | |
LEV | −0.250 *** | −0.170 *** |
(−20.04) | (−13.02) | |
NWC | −0.174 *** | −0.150 *** |
(−10.41) | (−12.42) | |
DEBTMT | 0.129 *** | 0.074 *** |
(13.10) | (10.32) | |
CAPX | −0.089 *** | −0.122 *** |
(−9.40) | (−22.92) | |
XRD | 0.034 * | 0.028 *** |
(1.91) | (9.08) | |
INDSIGMA | 0.211 *** | 0.255 *** |
(4.46) | (6.55) | |
MTB | 0.002 | 0.006 *** |
(1.35) | (6.40) | |
RSPREAD | 0.008 | −0.008 *** |
(1.06) | (−2.70) | |
Year FE | Yes | Yes |
Industry FE | Yes | No |
Firm FE | No | Yes |
No firms | 878 | 878 |
N | 5062 | 5062 |
AR(1) (p-value) | 0.000 | 0.000 |
AR(2) (p-value) | 0.063 | 0.126 |
Hansen (p-value) | 0.000 | 0.000 |
Dependent Variable: CASH | |||
---|---|---|---|
2010–2012 | 2013–2015 | 2016–2018 | |
Variables | (1) | (2) | (3) |
SIZE | −0.011 ** | −0.014 ** | −0.016 ** |
(−4.62) | (−5.00) | (−6.14) | |
CF | −0.030 | −0.049 | −0.129 ** |
(−0.91) | (−2.11) | (−5.51) | |
LEV | −0.298 ** | −0.240 ** | −0.233 ** |
(−7.84) | (−4.75) | (−5.47) | |
NWC | −0.056 | −0.012 | −0.061 |
(−1.83) | (−0.33) | (−1.85) | |
DEBTMT | 0.028 | −0.002 | 0.004 |
(1.21) | (−0.07) | (0.16) | |
CAPX | −0.126 ** | −0.067 ** | −0.093 ** |
(−5.87) | (−4.72) | (−7.08) | |
XRD | 0.101 ** | 0.096 ** | 0.061 ** |
(7.34) | (6.11) | (5.04) | |
INDSIGMA | 0.415 | 0.383 | 0.174 |
(2.08) | (2.01) | (1.52) | |
MTB | 0.017 ** | 0.015 ** | 0.018 ** |
(4.77) | (6.20) | (5.98) | |
RSPREAD | 0.019 * | −0.003 | 0.032 ** |
(3.60) | (−0.32) | (5.56) | |
Year FE | Yes | Yes | Yes |
Industry FE | Yes | Yes | Yes |
N | 1851 | 2155 | 2015 |
Adj. R2 | 0.389 | 0.351 | 0.386 |
Dependent Variable: CASH | ||||||
---|---|---|---|---|---|---|
Variables | (1) | (2) | (3) | (4) | (5) | (6) |
L.CASH | 0.709 *** | 0.725 *** | 0.735 *** | |||
(64.00) | (64.88) | (67.51) | ||||
SIZENA | −0.025 *** | −0.010 *** | ||||
(−10.49) | (−7.18) | |||||
SIZE1 | −0.015 *** | −0.006 *** | ||||
(−7.94) | (−4.42) | |||||
SIZE2 | −0.008 *** | −0.003 *** | ||||
(−4.01) | (−4.10) | |||||
CF | −0.033 | −0.052 * | −0.093 *** | 0.063 *** | 0.059 *** | 0.047 *** |
(−1.41) | (−2.29) | (−4.21) | (8.74) | (8.31) | (6.23) | |
LEV | −0.249 *** | −0.234 *** | −0.263 *** | −0.114 *** | −0.106 *** | −0.115 *** |
(−8.02) | (−7.07) | (−7.61) | (−6.14) | (−5.59) | (−6.03) | |
NWC | −0.046 * | −0.041 | −0.036 | −0.053 *** | −0.051 *** | −0.049 *** |
(−1.97) | (−1.66) | (−1.42) | (−4.71) | (−4.41) | (−4.12) | |
DEBTMT | 0.055 ** | −0.005 | −0.010 | 0.055 *** | 0.032 ** | 0.033 ** |
(2.94) | (−0.26) | (−0.52) | (4.46) | (2.66) | (2.68) | |
CAPX | −0.086 *** | −0.100 *** | −0.087 *** | −0.158 *** | −0.164 *** | −0.160 *** |
(−8.30) | (−8.99) | (−7.40) | (−13.04) | (−13.11) | (−12.95) | |
XRD | 0.080 *** | 0.074 *** | 0.085 *** | 0.033 *** | 0.030 *** | 0.033 *** |
(7.72) | (6.86) | (7.42) | (6.54) | (5.44) | (6.05) | |
INDSIGMA | 0.273 * | 0.288 ** | 0.350 ** | 0.155 ** | 0.157 ** | 0.177 ** |
(2.27) | (2.55) | (3.12) | (2.48) | (2.55) | (3.14) | |
MTB | 0.015 *** | 0.017 *** | 0.019 *** | 0.006 *** | 0.006 *** | 0.007 *** |
(7.34) | (7.86) | (8.33) | (4.74) | (5.26) | (4.96) | |
RSPREAD | 0.017 *** | 0.017 *** | 0.018 *** | −0.004 | −0.006 | −0.006 |
(3.86) | (4.23) | (4.74) | (−0.49) | (−0.68) | (−0.67) | |
Year FE | Yes | Yes | Yes | Yes | Yes | Yes |
Industry FE | Yes | Yes | Yes | Yes | Yes | Yes |
N | 6021 | 6021 | 6010 | 5062 | 5062 | 5053 |
Adj. R2 | 0.419 | 0.386 | 0.363 | 0.743 | 0.738 | 0.736 |
© 2020 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).
Share and Cite
Magerakis, E.; Gkillas, K.; Tsagkanos, A.; Siriopoulos, C. Firm Size Does Matter: New Evidence on the Determinants of Cash Holdings. J. Risk Financial Manag. 2020, 13, 163. https://doi.org/10.3390/jrfm13080163
Magerakis E, Gkillas K, Tsagkanos A, Siriopoulos C. Firm Size Does Matter: New Evidence on the Determinants of Cash Holdings. Journal of Risk and Financial Management. 2020; 13(8):163. https://doi.org/10.3390/jrfm13080163
Chicago/Turabian StyleMagerakis, Efstathios, Konstantinos Gkillas, Athanasios Tsagkanos, and Costas Siriopoulos. 2020. "Firm Size Does Matter: New Evidence on the Determinants of Cash Holdings" Journal of Risk and Financial Management 13, no. 8: 163. https://doi.org/10.3390/jrfm13080163