Determinants of cash holding in South Africa: Evidence from non-financial firms

Abstract

Cash holding is one of the most significant components of a firm’s current assets. The benefit of holding cash revolves around choosing the optimal timing of investment and avoiding under-price issues. This paper investigates the determinants of corporate cash holding of 80 non-financial firms in South Africa between 2007 and 2017. The Arellano-Bover/Blundell-Bond generalized method of moments (GMM) estimates indicate that leverage, firms growth opportunity, business confidence, economic growth and political stability have a negative effect on cash holdings, whereas debt maturity and cashflow exerts a positive influence. Other factors such as firm size, dividends payments, inflation rate and financial crises have an insignificant impact on company cash holdings.