Do Factors Affecting Firms`Cash Holdings Differ Across Sectors?: Evidence from Turkiye

Authors : İlhan Çam, Boğaçhan Sertuğ Gümrükçü

Pages : 189-200

Doi:10.21121/eab.20250112

View : 122 | Download : 101

Publication Date : 2025-02-04

Article Type : Research Paper

Abstract :We examine whether the determinants of firms\\\' cash holdings differ across different sectors, such as basic materials, consumer cyclicals, consumer non-cyclicals, energy, healthcare, industrials, real estate, technology, and utilities. Firm-level factors include market-to-book ratio, size, cash flow, net working capital, capital expenditures, leverage, cash flow volatility, R&D expenses, and dividend payment. External factors include periods of economic uncertainty, that is, times of financial crisis. The study\\\'s dataset includes 385 firms listed on Borsa Istanbul, Turkiye and 4,375 firm-year observations from 2001 to 2022. Data analysis was conducted using the Driscoll-Kraay robust standard errors panel data estimation method, which ensures unbiased and consistent results despite heteroscedasticity, autocorrelation, and cross-sectional dependence. The findings indicate that variables such as cash flow, net working capital, capital expenditures, leverage, R&D expenses, and dividends are key determinants shaping cash holding behavior in firms within Turkiye as a developing country, regardless of the sector in which these firms operate. Firms increased their cash reserves during the economic uncertainty. Additionally, the market-to-book value ratio and firm size influence cash holding levels differently depending on the sector. In conclusion, although some factors have a consistent impact across various sectors, sector-level analyses reveal unique characteristics and dynamics within each sector that shape the factors influencing firms\\\' cash management strategies.
Keywords : Cash holdings, Cash reserves, Cash management, Sectoral differences, Panel data analysis

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