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This study examines the effects of comparable companies, within the same industry, on cash-holding (CH) levels of a specific firm in the Stock Exchange of Thailand (SET). Peer effects are hypothesized to affect a firm's average CH levels.

The authors use data of listed firms in the Thai stock markets from 1995 to 2018. The sample consists of 5,277 firm-year observations. The authors perform robustness tests by incorporating gross domestic product, economy and competitiveness.

Peer firms' CH levels correspond positively to the specific firm's CH. This strengthens further for firms with high cash flow volatility during periods of high competition. Unfavorable economic periods also motivate the association between a firm's CH and peer firms' CH.

A policy on CH should account for cash held by peer firms. Firms can justify their CH policy as compatible with peers' cash flows, especially during periods of competitiveness and an unfavorable economy.

The authors provide novel evidence on how emerging markets' CH levels differ from those in developed markets and propose adjusted explanations for the rivalry- and information-based theories. The findings add substantial knowledge to corporate finance by arguing that CH policies are based on peer firms' strategic moves.