CORPORATE CASH HOLDINGS IN THE NIGERIAN CAPITAL MARKET: AN ANALYSIS OF FINANCIALLY CONSTRAINED AND NON-FINANCIALLY CONSTRAINED COMPANIES

Abstract

The purpose of this study is to determine the factors that influence the
corporate cash holdings of companies listed on the Nigerian Stock Exchange
(NSE) between 2005 and 2019 using a static and dynamic panel regression
technique. Although a variety of factors have been studied in the past, it is
unclear whether factors affecting companies that are financially constrained
differ from non-financially constrained companies. The findings
demonstrated that cash flow, company size, and growth opportunities are
significant determinants of corporate cash holdings. In particular, the tradeoff
theory supports a negative association between cash flow and corporate
cash holdings, but the pecking order theory supports a positive association
between company size and corporate cash holdings. Growth opportunities,
on the other hand, is consistent with free cash flow theory and has a negative
relationship with corporate cash holdings.