Financial determinants of cash holding levels: An analysis of Indian agricultural enterprises S., Misra M. (2019): Financial determinants of cash holding levels: An analysis of Indian agricultural enterprises. Agric. Econ. – Czech, 65: 240-248.
download PDF

A significant number of studies have been conducted on the determinants of cash holding levels for different corporates. However, no such study has been witnessed so far on the agricultural enterprises. In this study, we examine the determinants of the cash-holding levels for the Indian agrarian enterprises during 1995–2016 period. With the help of weighted least-squares (WLS) regression analysis, we find evidence that the Indian agro-enterprises with greater lucrative opportunities tend to hold less cash. On the other side, we found that large agro-enterprises tend to hold some other mode of liquid assets rather than cash. The firms with higher capital expenditure and distributing profits as a dividend were shown to hold more cash. In our analysis, we find supportive evidence of the static trade-off theory of cash holding. In general, transaction motives and precautionary motives also play an important role in explaining the determinants of cash holding levels for Indian agrarian enterprises.

Al-Najjar Basil (2013): The financial determinants of corporate cash holdings: Evidence from some emerging markets. International Business Review, 22, 77-88.
Ali Abbas (2013): Determinants of Cash holding in German Market. IOSR Journal of Business and Management, 12, 28-34.
BATES THOMAS W., KAHLE KATHLEEN M., STULZ RENÉ M. (2009): Why Do U.S. Firms Hold So Much More Cash than They Used To?. The Journal of Finance, 64, 1985-2021.
Boubaker S., Derouiche I., Nguyen D.K. (2015): Does the board of directors affect cash holdings? A study of French listed firms. Journal of Management & Governance, 19: 341–370.
Chand R. (2001): Emerging trends and issues in public and private investments in India agriculture: A statewise analysis. Indian Journal of Agricultural Economics, 56: 161.
Chireka Trust, Bamidele Fakoya Michael (2017): The determinants of corporate cash holdings levels: evidence from selected South African retail firms. Investment Management and Financial Innovations, 14, 79-93.
Choudhury Manisha, Mahanta Lipi, Goswami Jayashree, Mazumder Minakshi, Pegoo Barnali (2011): Socio-economic profile and food safety knowledge and practice of street food vendors in the city of Guwahati, Assam, India. Food Control, 22, 196-203.
Dittmar Amy K., Duchin Ran (): The Concentration of Cash: Cash Policies of the Richest Firms. SSRN Electronic Journal, , -
Dittmar Amy, Mahrt-Smith Jan, Servaes Henri (2003): International Corporate Governance and Corporate Cash Holdings. The Journal of Financial and Quantitative Analysis, 38, 111-133.
Fama Eugene F., French Kenneth R. (2005): Financing decisions: who issues stock?. Journal of Financial Economics, 76, 549-582
Ferreira Miguel A., Vilela Antonio S. (2004): Why Do Firms Hold Cash? Evidence from EMU Countries. European Financial Management, 10, 295-319.
Frank Murray Z, Goyal Vidhan K (2003): Testing the pecking order theory of capital structure. Journal of Financial Economics, 67, 217-248.
Gujarati Damodar (1968): The demand for money in India∗. Journal of Development Studies, 5, 59-64.
Gujarati D.N. (2009): Basic Econometrics. Tata McGraw-Hill Education.
Guney Yilmaz, Ozkan Aydin, Ozkan Neslihan (2007): International evidence on the non-linear impact of leverage on corporate cash holdings. Journal of Multinational Financial Management, 17, 45-60.
Hardin William G., Highfield Michael J., Hill Matthew D., Kelly G. Wayne (2009): The Determinants of REIT Cash Holdings. The Journal of Real Estate Finance and Economics, 39, 39-57
Jensen M.C. (1986): Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76: 323–329.
Keynes J.M. (2016): General Theory of Employment, Interest and Money. Macat Library, Routledge, Taylor and Francis group.
Kim Chang-Soo, Mauer David C., Sherman Ann E. (1998): The Determinants of Corporate Liquidity: Theory and Evidence. The Journal of Financial and Quantitative Analysis, 33, 335-359.
Kim Jiyoung, Kim Hyunjoon, Woods David (2011): Determinants of corporate cash-holding levels: An empirical examination of the restaurant industry. International Journal of Hospitality Management, 30, 568-574.
Kleinbaum D.G., Kupper L.L., Muller K.E. (1988): Applied Regression Analysis and Other Multivariate Method. PWS-KENT Publishing, Boston, MA.
Kusnadi Yuanto (2003): Corporate Cash Holdings and Corporate Governance Mechanisms. SSRN Electronic Journal, , -
Leary Mark T., Roberts Michael R. (): The Pecking Order, Debt Capacity, and Information Asymmetry. SSRN Electronic Journal, , -
Lee Rodgers Joseph, Nicewander W. Alan (1988): Thirteen Ways to Look at the Correlation Coefficient. The American Statistician, 42, 59-66.
Miller Merton H., Orr Daniel (1966): A Model of the Demand for Money by Firms. The Quarterly Journal of Economics, 80, 413-435.
Minton Bernadette A., Schrand Catherine (1999): The impact of cash flow volatility on discretionary investment and the costs of debt and equity financing. Journal of Financial Economics, 54, 423-460.
Myers S. C., Rajan R. G. (1998): The Paradox of Liquidity. The Quarterly Journal of Economics, 113, 733-771.
Myers Stewart C. (1984): The Capital Structure Puzzle. The Journal of Finance, 39, 575-592.
Opler T (1999): The determinants and implications of corporate cash holdings. Journal of Financial Economics, 52, 3-46.
Ozkan Aydin, Ozkan Neslihan (2004): Corporate cash holdings: An empirical investigation of UK companies. Journal of Banking & Finance, 28, 2103-2134.
PINKOWITZ LEE, STULZ RENÉ, WILLIAMSON ROHAN (2006): Does the Contribution of Corporate Cash Holdings and Dividends to Firm Value Depend on Governance? A Cross-country Analysis. The Journal of Finance, 61, 2725-2751.
Pinkowitz Lee Foster, Stulz Rene M., Williamson Rohan G. (): Is there a U.S. High Cash Holdings Puzzle after the Financial Crisis?. SSRN Electronic Journal, ,
Pinkowitz Lee, Williamson Rohan (2001): Bank Power and Cash Holdings: Evidence from Japan. Review of Financial Studies, 14, 1059-1082.
RIDDICK LEIGH A., WHITED TONI M. (2009): The Corporate Propensity to Save. The Journal of Finance, 64, 1729-1766.
Studenmund A.H. (2006): Using Econometrics. 5th ed. Pearson Education, New York.
Trejo-Pech C.O., Gunderson M.A., Baker T.G., Gray A.W., Boehlje M.D. (2015): Assessing cash holdings in agribusiness. International Food and Agribusiness Management Review, 18: 85.
White Halbert (1980): A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity. Econometrica, 48, 817-838
download PDF

© 2019 Czech Academy of Agricultural Sciences