Cash holdings, corporate performance and viability of Greek SMEs: Implications for stakeholder relationship management
ISSN: 1450-2194
Article publication date: 28 November 2019
Issue publication date: 8 September 2020
Abstract
Purpose
Several theories have been developed trying to explain the corporate decisions on cash holdings. Stakeholder theory is one of the arguments that urge firms with strong stakeholder relationships to hold more cash. The purpose of this paper is to shed further light on this issue by examining the impact of cash holdings on the financial performance and viability of Greek Small-Medium Enterprises before and after the Greek sovereign debt crisis.
Design/methodology/approach
The authors collected a large sample from Small-Medium-sized Enterprises (SMEs) and a comparable sample from large firms operating in Greece during the period 2003–2016. Panel regression analysis was performed before and after the Greek debt crisis.
Findings
Results indicated that cash holdings contribute positively to the profitability and viability of firms validating the precautionary theory of cash holdings in Greece. Before the crisis, SMEs and large firms both benefited significantly by cash holdings but after the crisis that positive impact of cash is more evident and significant for SMEs.
Practical implications
These findings corroborate the hypotheses that during a period of limited lending (and severe financial turmoil); cash holdings (and effective cash management) could be a vital tool for sustaining SMEs’ viability and financial performance. This study offers useful managerial implications and contributes to the ongoing debate about the impact of cash holdings on corporate performance.
Originality/value
This is the first study in the Greek business setting trying to examine the impact of cash holdings on financial performance within stakeholder-oriented firms during a period of financial turmoil.
Keywords
Citation
Dimitropoulos, P., Koronios, K., Thrassou, A. and Vrontis, D. (2020), "Cash holdings, corporate performance and viability of Greek SMEs: Implications for stakeholder relationship management", EuroMed Journal of Business, Vol. 15 No. 3, pp. 333-348. https://doi.org/10.1108/EMJB-08-2019-0104
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited