The relationship between idiosyncratic risk and cash holding of companies listed on the Tehran Stock Exchange

Subject Areas : Journal of Investment Knowledge

mohammadreza olob ¹ , iman dadashi ² , hamidreza gholamnia roshan ³

1 - PHD Student of Accounting, Babol Branch, Islamic Azad University, Babol, Iran
2 - Assistant Professor of Accounting, Qom University, Qom, Iran.
3 - Assistant Professor of Accounting, Babol Branch, Islamic Azad University, Babol, Iran

Received: 2020-04-14 Accepted : 2020-09-09 Published : 2022-09-23

Keywords: Tehran Stock Exchange, Agency cost, idiosyncratic risk, Cash holding,

Abstract :

The main purpose of this study is to investigate the relationship between idiosyncratic risk and cash holding of companies listed on the Tehran Stock Exchange. A total of 143 companies (1144 firm - year) have been studied during eight-year period of 2012-2019. The company's idiosyncratic risk is an important source of agency costs. Idiosyncratic risk is expected to indicate low management risk. Therefore, agency costs affect the discretionary idiosyncratic risk of the company's cash holding and allocating cash. Companies with discretionary idiosyncratic risk have more cash, and companies with high discretionary idiosyncratic risk have less cash reserves. The findings of the present study show that in general, there is a positive and significant relationship between special risk and cash holding.

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