Cash flow is an important factor influencing the level of corporate cash holdings. The main objective of this study was to investigate the relationship between corporate cash holdings and positive and negative cash flows Changes in corporate cash holdings as the dependent variable and negative and positive cash flows is independent variables while firm size, Tobin variable, capital expenditures, changes in net non-cash working capital, short-term debt are as control variables. In line with this objective, seven-year data (2005–2011), for 94 companies listed in Tehran Stock Exchange were studied. To test the hypotheses, multiple regressionsalong with combined data were used. In this study contend that the cash flow sensitivity of cash is asymmetric to cash flow. The asymmetry may be due to several reasons, including binding project contracts, bad news withholding, and agency costs. Using a sample of manufacturing firms from 2005 to 2011, we document that the cash flow sensitivity of cash is negative when a firm faces a positive cash flow environment, supporting Riddick and Whited (2009), but the cash flow sensitivity of cash is positive when a firm faces negative cash flows.
Cash flow sensitivity, Asymmetry, Positive cash flow, Negativ cash flow
