1Faculty of Business and Law, Multimedia University, Malacca, Malaysia
2Faculty of Commerce, Urumu Dhanalakshmi College, Trichy, Tamil Nadu, India
Online published on 7 September, 2015.
Cash holdings are the lifeblood of any company, especially those looking forward to invest in new projects and grow in the process. Cash can be generated internally from operations or supplied by external sources. Many start-ups and new ventures can not generate adequate revenue internally to fund all their capital needs and therefore they are dependent on external suppliers. A firm becomes financially constrained when all of its existing sources of capital are unable or unwilling to supply the desired amount of funds. Therefore, maintaining appropriate levels of liquidity within the firm is crucial towards the smooth operations of any business. Managers are more likely to reserve large proportion of cash as firm's assets for the purpose of capital expenditure, dividend payment to shareholders, and future investment opportunities (Almeida et al,2002). The present study focuses on determining the levels of Corporate Cash Holdings of Malaysian Firms, across different size and different industries. Moreover, the behavior of different determinants affecting a firm's cash holding has also been studied. Evidence from prior research indicates that these variables or determinants are constantly used in evaluating the cash holdings and these determinants include firm size (Kim et al., 1998), leverage factor (Opler et al., 1999), agency cost/ownership concentration(Grossman and Hart, 1988), growth opportunity (Shleifer and Vishny, 1992), internal source of financing (Ranjan D'Mello et.al 2007), and cash flow volatility (Minton and Schrand, 1999).
