Factors Affecting Cash Holdings: The Empirical Evidence of Non-Financial Firms.

Cash holdings has always remained a key issue in the field of corporate finance, investment and financing decisions. However, the evidence from the past studies regarding cash holdings and its determinants lacks the ability to present a detailed examination of the subject matter. Majority of the research analysis is being carried out in the developed economies like UK and USA and the results obtained are not generalizable to the developing countries, like Pakistan. According to the research authors in the field of finance such Shah and Hijazi (2004) and Akbar et al. (2013) accounting procedures, tax laws, leadership styles, reporting systems and institutional structures of both developed and developing countries have striking differences, which justify the reason for further research, to investigate the determinants of cash holdings. To achieve our goal, the study used fixed effect regression model. The study has taken 349 non-financial Pakistani firms listed on KSE100 index for the time period 2005 to 2012. The results reveal that capital employed and leverage has positive impact on cash holdings. However, the result is statistically insignificant for the capital employed. Cash flow, networking capital and size has negative and significant impact on cash holding. The global financial crisis has negative impact but the result is not statistically significant indicating that it has no statistically significant impact on cash holding of non-financial firms of Pakistan. [ABSTRACT FROM AUTHOR]