Cash Holding Adjustment Speed: The Role of Managerial Ability and Moderating Role of Political Connections in Tehran Stock Exchange

Subject Areas : Financial Accounting

Mohammad  Gholamrezapoor ¹ (Auditor of Behdad Hesab Aria Institute, Tehran, Iran)
Pouria  Kazemi ² (Department of Accounting, Faculty of Economics and Administrative Sciences, University of Mazandaran, Iran)
Narjes  Amirniya ³ (Department of Accounting, Bandargaz Branch, Islamic Azad University, Bandargaz, Iran)

Received: 2021-01-21 Accepted : 2021-04-03 Published : 2022-07-01

Keywords: Cash Holding, Partial adjustment model, political connections, cash holding adjustment Speed, managerial ability,

Abstract :

Optimal cash is an amount of cash that balances benefits of cash holding; and the speed of cash holding adjustment is called the rate of actual cash response to the optimal cash. The question of how fast companies compensate for excess or inadequate cash to the optimum level in terms of how closely they hold cash flow and maximize company value has been an important topic of interest for academics and managers in recent years; and they have examined factors affecting the speed of cash holding adjustment. Since company managers play important roles in firm's key decisions such as cash holding, the present study investigated the impact of managerial ability as an important management feature on the speed of cash holding adjustment to an optimal cash flow and study as well as the moderating effect of political connection. To this end, data of on companies during 2013 to 2018 were analyzed using econometric software (Eviews), multivariate linear regression. Results of statistical tests indicated that the managerial ability decreased the speed of cash holding adjustment to an optimal level if the cash rate of a company is higher than its optimal level. Furthermore, In companies with political connections, the negative relationship between managerial ability and the speed of adjusting cash holdings towards the optimal level is higher than other companies.

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