Factors Determining Corporate Cash Holdings In Normal And Crisis Period

The purpose of this study is to explore corporate cash holdings behavior of the non financial firms listed on the Nigerian Stock exchange over the period 2001-2015.Specifically,this study investigates the various factors which can influence the cash holdings in normal and the 2007 global financial crisis period.The results provide strong evidence by showing that corporate cash holdings determinants vary across normal and crisis period.The results show significant impacts of cash flow,liquidity,tangibility,growth on cash holdings in the pre-crisis period.However,these relationships become weaker(or even disappears)during the crisis period.Furthermore,we find that cash flow and volatility of cash flows are important attributes influencing the cash holdings of Nigerian firms.The additional analysis shows that Nigerian firms have target cash holdings in the normal period and they adjust towards target cash holdings.However,the financial crisis has influenced the target cash holdings,and thus firms are unable to maintain the target cash holdings.Tfie results are consistent to the alternative proxy of cash holdings and additional econometric models.This study provides important implications for corporate managers,academicians,researchers,and policymakers.From the theoretical perspective,the results show that trade-off theory is the major theory explaining the cash holdings behavior of the Nigerian firms.For policymakers,the results show that financial crisis can significantly influence the cash holding behavior of firms.Specifically,firms can devise the strategies to cope with the future financial crisis.However,firms should effectively manage their cash holdings level to avoid the sunk costs.Moreover,the results show that firms can actively manage their cash holdings through different channels including liquid assets and leverage effectively.