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Corporate cash holding during crisis and beyond: what matters the most

Ranajee (IBS-Hyderabad, ICFAI Foundation for Higher Education, Hyderabad, India)
Rajesh Pathak (Department of Accounting and Finance, Goa Institute of Management, Sattari, India)

International Journal of Managerial Finance

ISSN: 1743-9132

Article publication date: 12 March 2019

Issue publication date: 31 July 2019




The purpose of this paper is to examine the cash holding of firms during a crisis and test the widely accepted determinants of corporate cash holding (CCH) for their consistency across periods of crisis, stability and recovery, and across firm categories, in the emerging market context of India.


The study employs panel data and Fama–Macbeth regression techniques on publicly listed firms during 2001–2015, amid controls for idiosyncratic factors. Further empirical analysis is carried out through the disaggregation of firms based on group affiliation, controlling stake of promoters, financial constraints and firm size.


The study reports that cash levels are significantly higher during crisis periods for Indian firms. Moreover, promoter holding is observed to be a strong predictor of CCH, which is an addition to the list of predictors in existing literature. Additionally, most of the predictors of cash holding turn out to be consistent through periods of financial crisis, stability and recovery. A firm’s age and growth prospects do not determine cash levels for Indian firms; however, cash-flow volatility, firm size, leverage and non-cash working capital requirements help to determine the cash levels of the firm consistently through different periods. Group-affiliated firms are less likely to engage in cash accumulation as opposed to firms that are large and financially constrained and have high promoter stakes.


The study is unique because it examines the consistency of determinants of cash holding across good and turbulent times and across firm classifications. Moreover, the study uses a broad sample of firms and investigates the topic for a relatively long period in an emerging market setup.



Ranajee, R. and Pathak, R. (2019), "Corporate cash holding during crisis and beyond: what matters the most", International Journal of Managerial Finance, Vol. 15 No. 4, pp. 492-510.



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