Research Article
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The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index

Year 2024, Volume: 13 Issue: 2, 467 - 476, 22.04.2024

Ahmet Özcan

https://doi.org/10.33206/mjss.1281263

Abstract

Cash is of great importance to firms operating in emerging economies. Cash, one of the most important assets, creates shareholder value when rationally used by firm management. This paper aims to reveal the relationship between financial performance and cash holdings by using a sample that consists of non-financial firms listed in Borsa Istanbul 50 index. The result of empirical analysis provides strong evidence that financial performance is positively influenced by cash holdings. Further, firm size, capital intensity ratio and current ratio did not significantly influence the financial performance of sample firms, while financial performance of sample firms is significantly influenced sales growth and financial leverage. Overall, the research findings indicate that firm-specific factors are important factors that affect the relationship between financial performance and cash holdings. The present paper provides important insights for creditors, shareholders and firm management on the impacts of cash holding levels on financial performance.

Keywords

Cash Holdings Financial Performance Cash Management

Ethical Statement

In the writing process of the study titled “The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index”, there were followed the scientific, ethical and the citation rules; was not made any falsification on the collected data and this study was not sent to any other academic media for evaluation.

References

  • Abushammala, S. N., & Sulaiman, J. (2014). Cash holdings and corporate profitability: Some evidences form Jordan. International Journal of Innovation and Applied Studies, 8(3), 898-907.
  • Alnori, F. (2020). Cash holdings: Do they boost or hurt firms’ performance? Evidence from listed non-financial firms in Saudi Arabia. International Journal of Islamic and Middle Eastern Finance and Management, 13(5), 919-934.
  • Alnori, F., & Bugshan, A. (2023). Cash holdings and firm performance: empirical analysis from Shariah- compliant and conventional corporations. International Journal of Islamic and Middle Eastern Finance and Management, 16(3), 498-515.
  • Baltagi, B. H. (Ed.). (2006). Panel data econometrics: Theoretical contributions and empirical applications. Emerald Group Publishing.
  • Bates, T. W., Kahle, K. M., & Stulz, R. M. (2009). Why do US firms hold so much more cash than they used to?. The Journal of Finance, 64(5), 1985-2021.
  • Brealey, R. A., Myers, S. C., Sandri, S., & Bigelli, M. (2003). Principi di finanza aziendale. Milano: McGraw-Hill.
  • Chang, C. C., & Yang, H. (2022). The role of cash holdings during financial crises. Pacific-Basin Finance Journal, 72, 101733.
  • Chintha, S. S., & Prasad, K. V. (2021). A study on the impact of cash management on the financial performance of the listed manufacturing companies from Muscat securities market, Sultanate of Oman. International Journal of Business and Administrative Studies, 7(1), 25.
  • Chireka, T., & Fakoya, M. B. (2017). The determinants of corporate cash holdings levels: evidence from selected South African retail firms. Investment Management and Financial Innovations, 14(2), 79-93.
  • Clark, T. S., & Linzer, D. A. (2015). Should I use fixed or random effects?. Political Science Research and Methods, 3(2), 399-408.
  • Collischon, M., & Eberl, A. (2020). Let’s talk about fixed effects: Let’s talk about all the good things and the bad things. Kölner Zeitschrift für Soziologie und Sozialpsychologie, 72(2), 289-299.
  • Danso, A., Lartey, T. A., Gyimah, D., & Adu-Ameyaw, E. (2020). Leverage and performance: do size and crisis matter?. Managerial Finance, 47(5), 635-655.
  • Deb, P., David, P., & O'Brien, J. (2017). When is cash good or bad for firm performance?. Strategic Management Journal, 38(2), 436-454.
  • Dittmar, A., Mahrt-Smith, J., & Servaes, H. (2003). International corporate governance and corporate cash holdings. Journal of Financial and Quantitative Analysis, 38(1), 111-133.
  • Doan, T. (2020). The effect of cash holdings on firm performance: Evidence from Vietnam listed firms. Accounting, 6(5), 721-726.
  • El-Ansary, O., & Al-Gazzar, H. (2021). Working capital and financial performance in MENA region. Journal of Humanities and Applied Social Sciences, 3(4), 257-280.
  • Eljelly, A. M. (2004). Liquidity‐profitability tradeoff: An empirical investigation in an emerging market. International Journal of Commerce and Management, 14(2), 48-61.
  • Ghosh, A., Cai, F., & Fosberg, R. H. (2017). Capital structure and firm performance. Routledge.
  • Guizani, M. (2017). The financial determinants of corporate cash holdings in an oil rich country: Evidence from Kingdom of Saudi Arabia. Borsa Istanbul Review, 17(3), 133-143.
  • Guo, H., Legesse, T. S., Tang, J., & Wu, Z. (2021). Financial leverage and firm efficiency: The mediating role of cash holding. Applied Economics, 53(18), 2108-2124.
  • Harford, J., Mansi, S. A., & Maxwell, W. F. (2008). Corporate governance and firm cash holdings in the US. Journal of Financial Economics, 87(3), 535-555.
  • Isshaq, Z., Bokpin, G. A., & Onumah, J. M. (2009). Corporate governance, ownership structure, cash holdings, and firm value on the Ghana Stock Exchange. The Journal of Risk Finance, 10(5), 488-499.
  • Jabbouri, I., & Almustafa, H. (2021). Corporate cash holdings, firm performance and national governance: evidence from emerging markets. International Journal of Managerial Finance, 17(5), 783-801.
  • Jebran, K., Chen, S., & Tauni, M. Z. (2019). Principal-principal conflicts and corporate cash holdings: Evidence from China. Research in International Business and Finance, 49, 55-70.
  • Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, 76(2), 323-329.
  • Jiang, Y., Mubarik, M. S., Zaman, S. I., Alam, S. H., & Arif, M. (2023). Corporate governance, cash holding, and firm performance in an emerging market. International Journal of Finance and Economics.
  • Karim, R., Al Mamun, M. A., & Kamruzzaman, A. S. M. (2023). Cash conversion cycle and financial performance: evidence from manufacturing firms of Bangladesh. Asian Journal of Economics and Banking.
  • Kim, C., & Bettis, R. A. (2014). Cash is surprisingly valuable as a strategic asset. Strategic Management Journal, 35(13), 2053-2063.
  • La Rocca, M., & Cambrea, D. R. (2019). The effect of cash holdings on firm performance in large Italian companies. Journal of International Financial Management & Accounting, 30(1), 30-59.
  • Lian, C., & Ma, Y. (2021). Anatomy of corporate borrowing constraints. The Quarterly Journal of Economics, 136(1), 229-291.
  • Margaritis, D., & Psillaki, M. (2010). Capital structure, equity ownership and firm performance. Journal of Banking & Finance, 34(3), 621-632.
  • Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of financial economics, 52(1), 3-46.
  • Pinkowitz, L., Stulz, R. M., & Williamson, R. (2013). Is there a US high cash holdings puzzle after the financial crisis?. Fisher College of Business Working Paper, (2013-03), 07.
  • Schunck, R. (2013). Within and between estimates in random-effects models: Advantages and drawbacks of correlated random effects and hybrid models. The Stata Journal, 13(1), 65-76.
  • Seifert, B., & Gonenc, H. (2018). The effects of country and firm-level governance on cash management. Journal of International Financial Markets, Institutions and Money, 52, 1-16.
  • Sun, J., Yuan, R., Cao, F., & Wang, B. (2017). Principal–principal agency problems and stock price crash risk: Evidence from the split‐share structure reform in China. Corporate Governance: An International Review, 25(3), 186-199.
  • Vishnani, S., & Shah, B. K. (2007). Impact of working capital management policies on corporate performance —An empirical study. Global Business Review, 8(2), 267-281.
  • Yun, J., Ahmad, H., Jebran, K., & Muhammad, S. (2021). Cash holdings and firm performance relationship: Do firm-specific factors matter?. Economic Research-Ekonomska Istraživanja, 34(1), 1283-1305.

Nakit Bulundurma Düzeyi ve Finansal Performans: Borsa İstanbul 50 Endeksinde Yer Alan Firmalardan Kanıtlar

Year 2024, Volume: 13 Issue: 2, 467 - 476, 22.04.2024

Ahmet Özcan

https://doi.org/10.33206/mjss.1281263

Abstract

Gelişmekte olan ülkelerde faaliyet gösteren firmalar için nakit büyük bir önem arz etmektedir. Firmalar için en önemli varlıklar arasında yer alan nakit, firma yönetimi tarafından rasyonel olarak kullanılması durumunda hissedar değerini artırmaktadır. Bu makale, Borsa İstanbul 50 endeksinde yer alan finansal olmayan firmalardan oluşan bir örneklem kullanarak finansal performans ile nakit bulundurma düzeyi arasındaki ilişkiyi araştırmayı amaçlamaktadır. Regresyon analizinin sonuçları, finansal performansın yüksek düzeyde tutulan nakit varlıklardan olumlu etkilendiğine dair güçlü kanıtlar sunmaktadır. Ayrıca, firma büyüklüğü, sermaye yoğunluğu oranı ve cari oran, örnek firmaların finansal performansını önemli ölçüde etkilemezken, satış büyümesi ve finansal kaldıraç örnek firmaların finansal performansını önemli ölçüde etkilemektedir. Genel olarak, araştırma bulguları, firmaya özgü faktörlerin finansal performans ile nakit tutma arasındaki ilişkiyi etkileyen önemli faktörler olduğunu göstermektedir. Bu çalışma kreditörler, hissedarlar ve firma yönetimi için nakit tutma seviyesinin finansal performans üzerindeki etkileri hakkında önemli bilgiler sunmaktadır.

Keywords

Nakit Bulundurma Finansal Performans Nakit Yönetimi

References

  • Abushammala, S. N., & Sulaiman, J. (2014). Cash holdings and corporate profitability: Some evidences form Jordan. International Journal of Innovation and Applied Studies, 8(3), 898-907.
  • Alnori, F. (2020). Cash holdings: Do they boost or hurt firms’ performance? Evidence from listed non-financial firms in Saudi Arabia. International Journal of Islamic and Middle Eastern Finance and Management, 13(5), 919-934.
  • Alnori, F., & Bugshan, A. (2023). Cash holdings and firm performance: empirical analysis from Shariah- compliant and conventional corporations. International Journal of Islamic and Middle Eastern Finance and Management, 16(3), 498-515.
  • Baltagi, B. H. (Ed.). (2006). Panel data econometrics: Theoretical contributions and empirical applications. Emerald Group Publishing.
  • Bates, T. W., Kahle, K. M., & Stulz, R. M. (2009). Why do US firms hold so much more cash than they used to?. The Journal of Finance, 64(5), 1985-2021.
  • Brealey, R. A., Myers, S. C., Sandri, S., & Bigelli, M. (2003). Principi di finanza aziendale. Milano: McGraw-Hill.
  • Chang, C. C., & Yang, H. (2022). The role of cash holdings during financial crises. Pacific-Basin Finance Journal, 72, 101733.
  • Chintha, S. S., & Prasad, K. V. (2021). A study on the impact of cash management on the financial performance of the listed manufacturing companies from Muscat securities market, Sultanate of Oman. International Journal of Business and Administrative Studies, 7(1), 25.
  • Chireka, T., & Fakoya, M. B. (2017). The determinants of corporate cash holdings levels: evidence from selected South African retail firms. Investment Management and Financial Innovations, 14(2), 79-93.
  • Clark, T. S., & Linzer, D. A. (2015). Should I use fixed or random effects?. Political Science Research and Methods, 3(2), 399-408.
  • Collischon, M., & Eberl, A. (2020). Let’s talk about fixed effects: Let’s talk about all the good things and the bad things. Kölner Zeitschrift für Soziologie und Sozialpsychologie, 72(2), 289-299.
  • Danso, A., Lartey, T. A., Gyimah, D., & Adu-Ameyaw, E. (2020). Leverage and performance: do size and crisis matter?. Managerial Finance, 47(5), 635-655.
  • Deb, P., David, P., & O'Brien, J. (2017). When is cash good or bad for firm performance?. Strategic Management Journal, 38(2), 436-454.
  • Dittmar, A., Mahrt-Smith, J., & Servaes, H. (2003). International corporate governance and corporate cash holdings. Journal of Financial and Quantitative Analysis, 38(1), 111-133.
  • Doan, T. (2020). The effect of cash holdings on firm performance: Evidence from Vietnam listed firms. Accounting, 6(5), 721-726.
  • El-Ansary, O., & Al-Gazzar, H. (2021). Working capital and financial performance in MENA region. Journal of Humanities and Applied Social Sciences, 3(4), 257-280.
  • Eljelly, A. M. (2004). Liquidity‐profitability tradeoff: An empirical investigation in an emerging market. International Journal of Commerce and Management, 14(2), 48-61.
  • Ghosh, A., Cai, F., & Fosberg, R. H. (2017). Capital structure and firm performance. Routledge.
  • Guizani, M. (2017). The financial determinants of corporate cash holdings in an oil rich country: Evidence from Kingdom of Saudi Arabia. Borsa Istanbul Review, 17(3), 133-143.
  • Guo, H., Legesse, T. S., Tang, J., & Wu, Z. (2021). Financial leverage and firm efficiency: The mediating role of cash holding. Applied Economics, 53(18), 2108-2124.
  • Harford, J., Mansi, S. A., & Maxwell, W. F. (2008). Corporate governance and firm cash holdings in the US. Journal of Financial Economics, 87(3), 535-555.
  • Isshaq, Z., Bokpin, G. A., & Onumah, J. M. (2009). Corporate governance, ownership structure, cash holdings, and firm value on the Ghana Stock Exchange. The Journal of Risk Finance, 10(5), 488-499.
  • Jabbouri, I., & Almustafa, H. (2021). Corporate cash holdings, firm performance and national governance: evidence from emerging markets. International Journal of Managerial Finance, 17(5), 783-801.
  • Jebran, K., Chen, S., & Tauni, M. Z. (2019). Principal-principal conflicts and corporate cash holdings: Evidence from China. Research in International Business and Finance, 49, 55-70.
  • Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, 76(2), 323-329.
  • Jiang, Y., Mubarik, M. S., Zaman, S. I., Alam, S. H., & Arif, M. (2023). Corporate governance, cash holding, and firm performance in an emerging market. International Journal of Finance and Economics.
  • Karim, R., Al Mamun, M. A., & Kamruzzaman, A. S. M. (2023). Cash conversion cycle and financial performance: evidence from manufacturing firms of Bangladesh. Asian Journal of Economics and Banking.
  • Kim, C., & Bettis, R. A. (2014). Cash is surprisingly valuable as a strategic asset. Strategic Management Journal, 35(13), 2053-2063.
  • La Rocca, M., & Cambrea, D. R. (2019). The effect of cash holdings on firm performance in large Italian companies. Journal of International Financial Management & Accounting, 30(1), 30-59.
  • Lian, C., & Ma, Y. (2021). Anatomy of corporate borrowing constraints. The Quarterly Journal of Economics, 136(1), 229-291.
  • Margaritis, D., & Psillaki, M. (2010). Capital structure, equity ownership and firm performance. Journal of Banking & Finance, 34(3), 621-632.
  • Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of financial economics, 52(1), 3-46.
  • Pinkowitz, L., Stulz, R. M., & Williamson, R. (2013). Is there a US high cash holdings puzzle after the financial crisis?. Fisher College of Business Working Paper, (2013-03), 07.
  • Schunck, R. (2013). Within and between estimates in random-effects models: Advantages and drawbacks of correlated random effects and hybrid models. The Stata Journal, 13(1), 65-76.
  • Seifert, B., & Gonenc, H. (2018). The effects of country and firm-level governance on cash management. Journal of International Financial Markets, Institutions and Money, 52, 1-16.
  • Sun, J., Yuan, R., Cao, F., & Wang, B. (2017). Principal–principal agency problems and stock price crash risk: Evidence from the split‐share structure reform in China. Corporate Governance: An International Review, 25(3), 186-199.
  • Vishnani, S., & Shah, B. K. (2007). Impact of working capital management policies on corporate performance —An empirical study. Global Business Review, 8(2), 267-281.
  • Yun, J., Ahmad, H., Jebran, K., & Muhammad, S. (2021). Cash holdings and firm performance relationship: Do firm-specific factors matter?. Economic Research-Ekonomska Istraživanja, 34(1), 1283-1305.
There are 38 citations in total.

Details

Primary Language English
Subjects Theory of Economy
Journal Section Research Article
Authors

Ahmet Özcan 0000-0002-9021-6096

Publication Date April 22, 2024
Submission Date April 11, 2023
Published in Issue Year 2024 Volume: 13 Issue: 2

Cite

APA Özcan, A. (2024). The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index. MANAS Sosyal Araştırmalar Dergisi, 13(2), 467-476. https://doi.org/10.33206/mjss.1281263
AMA Özcan A. The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index. MJSS. April 2024;13(2):467-476. doi:10.33206/mjss.1281263
Chicago Özcan, Ahmet. “The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index”. MANAS Sosyal Araştırmalar Dergisi 13, no. 2 (April 2024): 467-76. https://doi.org/10.33206/mjss.1281263.
EndNote Özcan A (April 1, 2024) The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index. MANAS Sosyal Araştırmalar Dergisi 13 2 467–476.
IEEE A. Özcan, “The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index”, MJSS, vol. 13, no. 2, pp. 467–476, 2024, doi: 10.33206/mjss.1281263.
ISNAD Özcan, Ahmet. “The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index”. MANAS Sosyal Araştırmalar Dergisi 13/2 (April 2024), 467-476. https://doi.org/10.33206/mjss.1281263.
JAMA Özcan A. The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index. MJSS. 2024;13:467–476.
MLA Özcan, Ahmet. “The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index”. MANAS Sosyal Araştırmalar Dergisi, vol. 13, no. 2, 2024, pp. 467-76, doi:10.33206/mjss.1281263.
Vancouver Özcan A. The Level of Cash Holdings and Financial Performance: Evidence from Firms Listed on Borsa Istanbul 50 Index. MJSS. 2024;13(2):467-76.
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