Value of Cash Holdings: An Empirical Evidence on Malaysian Publicly Listed Companies
This study examines corporate cash holdings motives, the cross-sectional variations in their values, as well as their effect on investment opportunities. I use a sample of 315 Malaysian publicly listed firms from years 2005 to 2010 which include the period of pre, during and after World Financial cr...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English English |
| Published: |
2011
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| Subjects: | |
| Online Access: | http://etd.uum.edu.my/2686/1/Bannapov_Feruzbek_Mirzarakhmonovich.pdf http://etd.uum.edu.my/2686/2/1.Bannapov_Feruzbek_Mirzarakhmonovich.pdf http://etd.uum.edu.my/2686/ |
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| Summary: | This study examines corporate cash holdings motives, the cross-sectional variations in their values, as well as their effect on investment opportunities. I use a sample of 315 Malaysian publicly listed firms from years 2005 to 2010 which include the period of pre, during and after World Financial crisis. I develop three competing hypotheses
(transaction motive, agency motive, and tax motive), theory of financing hierarchy, investment opportunities and value of cash. Findings show that an additional ringgit held by Malaysian firms worth approximately between MYR0.90 and MYR0.93, indicating that shareholders believe that the benefits of companies holding cash outweigh the potential liquidity problems of agency cost associated with it. I also estimate marginal value of cash holdings of the firms by dividing them into three investment opportunity groups. I find that the marginal value of cash holding is MYR0.94 for firms with high investment opportunity, while it is MYR0.91 and MYR0.84 for firms with medium and low investment opportunity respectively. The findings are consistent with previous studies and support all the hypotheses tested. |
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