Do Real Options of Cash Holdings Matter? Evidence from Tehran Stock Exchange
Subject Areas : • Emerging technology in the field of Accounting and its futurehassan nazari 1 * , Mohammad taghi kabiri 2
1 - Assistant Professor, Department of Management and Accounting, Faculty of Humanities, Zanjan University, Zanjan, Iran
2 - Assistant Professor of Accounting Department, Economics Faculty, Lorestan University, Khorramabad, Iran
Keywords: Stock Return, Excess Return, Cash Holding, Real option component of cash holding, Real Options Mode,
Abstract :
Subject and purpose: This paper investigates the relationship between the real option component of cash holding and stock excess return on the Tehran Stock Exchange. The real option component of cash holding indicates the amount of retained cash not affected by the market and other variables and optionally managed by the management. Methodology: Two hypotheses were developed and tested, one at the stock level and another at the portfolio level. A sample of 121 companies on the Tehran Stock Exchange for 10 years from 2012 to 2021 was selected and a multivariate regression model was used to analyze the gathered data. Findings: Findings showed a positive relationship between the real option component of cash holding and stocks’ excess return however, this relationship is stronger in portfolios with a lower real option component of cash holding. Conclusion: Managers can gain excess return by holding more cash than their operational and investment needs, but this has a reverse effect as the component reaches higher levels.
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