Investigating the Asymmetric Models of Cash Holding Adjustment Speed: Dummy Variable, Quadratic and Threshold Regression Models
الموضوعات :Milad Emamgholipour Archi 1 , Seyed Ali Nabavi Chashmi 2 , Iman Dadashi 3 , Maryam Shafiee Kakhki 4
1 - Ph.D. Student, Department of Accounting, Babol Branch, Islamic Azad University, Babol, Iran.
2 - Department of Management, Babol Branch, Islamic Azad University, Babol, Iran.
3 - Department of Accounting, University of Qom, Qom, Iran
4 - Department of Economic, Babol Branch, Islamic Azad University, Babol, Iran.
الکلمات المفتاحية: cash holding adjustment Speed, Asymmetric Models, Optimal Cash,
ملخص المقالة :
Proving helpful in an efficient management of cash in order to reach optimal cash and clearly explain relevant optimization policies, this study examined the adjustment speed of cash holding using asymmetric models. The sample consisted of 117 firms listed in Tehran Stock Exchange and their financial details over the 2009-2018 period. Once the optimal level for cash holding was identified, asymmetric models such as the dummy variable approach, the quadratic model, and the threshold regression model were employed to test the adjustment speed of cash holding. The results revealed that cash-rich firms are moving toward optimal cash at a greater speed than cash-poor firms. In addition, the results from the quadratic model showed a non-linear, skewing effect of the cash holding adjustment speed in terms of the different cash levels. Therefore, there is an optimal level of cash holding that enables firms to deviate from the cash target. Should firms fall outside the optimal cash range, cash adjustment will occur at a greater speed, and it will be both partial and asymmetric.
[1] Alles, L., Lian, Y., Xu, C.Y., The Determinants of Target Cash Holdings and Adjustment Speeds: An Empirical Analysis of Chinese firm, Working Papar, 2012. Doi: 10.2139/ssrn.1981818.
[2] Almeida, H., Campello, M., Weisbach, M., The cash flow sensitivity of cash, The Journal of Finance, 2004, 59, P. 1777-1804. Doi: 10.1111/j.1540-6261.2004.00679.x.
[3] Almeida, H., Campello, M., Cunha, I., Weisbach, M.S., Corporate Liquidity Management: A Conceptual Framework and Survey, Annual Review of Financial Economics, 2014, P. 135-162. Doi: 10.1146/annurev-financial-110613-034502.
[4] Bai, J., Perron, P., Computation and analysis of multiple structural change models, Journal of Applied Econometrics, 2003, 18, P. 1-22. Doi: 10.1002/jae.659.
[5] Bates, T., Chang, C., Chi, J.D., Why Has the Value of Cash Increased Over Time? Journal of Financial and Quantitative Analysis, 2017, 30(1), P.166-192. Doi: 10.2139/ssrn.1975491.
[6] Bates, T., Kahle, K., Stulz, R., Why do US firms hold so much more cash than they used to? The Journal of Finance, 2009, P. 1985-2022. Doi: 10.1111/j.1540-6261.2009.01492.x.
[7] Bolo, Q., Babajani, J., Mohseni Maleki, B., The relationship between more and less than optimal cash, with the future performance of companies listed on the Tehran Stock Exchange, Journal of Accounting Knowledge, 2012, 3(11), P. 7-29. Doi: 10.22103/JAK.2013.502. (in Persian)
[8] Byoun, S., How and when do firms adjust their capital structures toward targets? Journal of Finance, 2008, 63, P. 3069-3096. Doi: 10.1111/j.1540-6261.2008.01421.x.
[9] Chang, L., Deng, K., Wang, X., The Dynamic Speed of Cash Holding Adjustment in a Transition Economy: A New Approach and Evidence, Emerging Markets Finance & Trade, 2016, 6(1), P.1-15.
Doi: 10.1080/1540496X.2016.1110460.
[10] Chang, Y., Benson, K.L., Faff, R.W., Asymmetric Modelling of the Adjustment Speed of Cash Holdings, Working Papar, 2017. Doi: 10.2139/ssrn.2914986.
[11] Cho, H., Choi, S., Kim, M., Cash Holdings Adjustment Speed and Managerial Ability, Asia-Pacific Journal of Financial Studies, 2018, 14(1), P.1-25. Doi: 10.1111/ajfs.12235.
[12] Faulkender, M., Flannery, M.J., Hankins, K.W., Smith, J.M., Cash flows and leverage adjustments, Journal of Financial Economics, 2012, 103, P. 632-646. Doi: 10.1016/j.jfineco.2011.10.013.
[13] Flannery, M.J., Rangan, K.P., Partial adjustment toward target capital structures, Journal of Financial Economics, 2006, 79, P. 469-506. Doi: 10.1016/j.jfineco.2005.03.004.
[14] Friedrich, R.J., In defense of multiplicative terms in multiple regression equations, American Journal of Political Science, 1982, 26(4), P. 797-833. Doi: 10.2307/2110973.
[15] Guney, Y., Ozkan, A., Ozkan, N., International evidence on the non-linear impact of leverage on corporate cash holdings, Journal of Multinational Financial Management, 2009, 17(1), P. 246-267.
Doi: 10.1016/j.mulfin.2006.03.003.
[16] Hansen, B.E., Threshold Effects in Non-Dynamic Panels: Estimation, Testing, and Inference, Journal of Econometrics, 1999, 93, P. 345-368. Doi: 10.1016/S0304-4076(99)00025-1.
[17] Huang, R., Ritter, J., Testing theories of capital structure and estimating the speed of adjustment, Journal of Financial and Quantitative Analysis, 2009, 44, P. 237-271.
[18] Izadikhah, M., Group decision making process for supplier selection with TOPSIS method under interval-valued intuitionistic fuzzy numbers. Adv. Fuzzy Sys. 2012, 2, Doi: 10.1155/2012/407942
[19] Jensen, M., Agency costs of free cash flow, corporate finance, and takeovers, The American Economic Review, 1986, 76, P. 323-329.
[20] Jiang, Z., Lie, E., Cash holding adjustments and managerial entrenchment, Journal of Corporate Finance, 2016, 36, P. 190-205. Doi: 10.1016/j.jcorpfin.2015.12.008.
[21] Karami Taleghani, F., Watan Parast, M.R., Investigating the effect of financial distress on the speed of adjustment of cash holding with emphasis on growth opportunities and financial constraints, Accounting and Management Perspectives, 2020, 36, P. 26-46. (in Persian)
[22] Khani, A., Yousefi, A., Investigating the rate of adjustment of cash holding towards its optimal level of holding in companies listed on the Tehran Stock Exchange using the generalized torque method, Second National Conference on Accounting, Financial Management and Investment, Gorgan, Golestan Scientific and Professional Association of Managers and Accountants, 2013. (in Persian)
[23] Lee, S., Xiao, Q., An examination of the curvilinear relationship between capital intensity and firm performance for publicly traded US hotels and restaurants, International Journal of Contemporary Hospitality Management, 2011, 23(6), P. 862-880. Doi: 10.1108/09596111111153510.
[24] Oler, D., Picconi, M., Implications of insufficient and excess cash for future performance, Journal of Financial Economics, 2009, 65, P. 223-247. Doi: 10.1111/1911-3846.12012.
[25] Opler, T., Pinkowitz, L., Stulz, R., Williamson, R., The determinants and implications of corporate cash holdings, Journal of Financial Economics, 1999, 52. Doi: 10.1016/S0304-405X(99)00003-3.
[26] Orlova, S.V., Rao, R.P., Cash Holdings Speed of Adjustment, International Review of Economics and Finance, 2018, 54, P. 1-14. Doi: 10.1016/j.iref.2017.12.011.
[27] Rasaian, A., Rahimi, F., Hanjari, S., The effect of intra-organizational regulatory mechanisms of corporate governance on the level of cash holding in Tehran Stock Exchange, Financial Accounting Research, 2011, 2(4), P. 125-144. (in Persian)
[28] Saber Mahani, M., Nikbakht, M.R., Deldar, M., Testing the effectiveness of customer focus on the speed of adjusting cash holdings on the Tehran Stock Exchange, Journal of Financial Management Strategy, 2021, 32, P. 55-78. Doi: 10.22051/JFM.2019.23264.1864. (in Persian)
[29] Shakeri, A., Jahanshad, A., Optimal cash flow during the company's business cycle (maturity, growth, decline) with emphasis on financing risk and profitability, Management Accounting and Auditing Knowledge, 2018, 26, P. 83-94. (in Persian)
[30] Siddiqua, G.A., Rehman, A., Hussain, S., Asymmetric targeting of corporate cash holdings and financial constraints in Pakistani firms, Journal of Asian Business and Economic Studies, 2019, 26(1), P. 76-97.
Doi: 10.1108/JABES-07-2018-0056.
[31] Truong. K.D., Firm Characteristics and Cash Holdings Speed of Adjustment: Evidence from Vietnam, The Journal of Asian Finance, Economics and Business, 2021, 8(8), P.137-148.
Doi: 10.13106/jafeb.2021.vol8.no8.0137.
[32] Venkiteshwaran, V., Partial Adjustment Toward Optimal Cash Holding Levels, Review of Financial Economics, 2011, 20(3), P. 113-121. Doi: 10.1016/j.rfe.2011.06.002.
[33] Yazdani, A., Babajani, J., Bolo, Q., Investigating the nonlinear relationship between ownership structure and timely publication of profit information of companies listed on the Tehran Stock Exchange, Accounting Knowledge, 2016, 25, P. 39-57. Doi: 10.22103/JAK.2016.1443. (in Persian)
[34] Zanjirdar, M., Madahi, Z., and Kasbi. P., Comparative analysis of sticky SGA costs and cost of goods sold: Evidence from Tehran Stock Exchange, Management Science Letters, 2014, 4.3, P.521-526. Doi:10.5267/j.msl.2014.1.014
