2014

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Browsing 2014 by Author "Shama Urooj"

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    Impact of Leverage on Cash Holdings
    (UMT.Lahore, 2014) Shama Urooj
    The study attempts to investigate the cash holding behavior of Pakistani non-financial firms using the data of 100 companies for the period 2009-2014.The study mainly focuses to investigate the effect of leverage on cash holdings. This paper also investigates the behavior of corporate governance variables in the context of cash holdings. The study observes leverage -cash holding relationship of non–financial firms as non – linear. Descriptive statistics show that Pakistani firms hold an average of approximately 9.9% cash. Overall results indicate leverage- cash holding relationship as a negative, one at low level but as leverage increases cash holdings also increase which shows that firm’s decisions regarding borrowing debt have nonlinear impact on firm’s cash holding choices. At high level of leverage, positive connection is observed between cash holdings and leverage indicating this as a reflection of precautionary effect. The results of the study support the previous literature findings regarding their nonlinear relation. The study also shows that there are firm specific as well as corporate governance variables which affect the cash holding decisions of the firms. As a result, while determining the cash holding policy of the firm, both the firm specific and the corporate governance variables play an important and significant role. Investment opportunity (Tobin Q) and institutional ownership are the most prominent firm specific factor and corporate governance variable that have more influence on firm cash holding policies in Pakistan.