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Impact of Macroeconomic Performance on Corporate Cash Holdings: Some Evidences from Jordan

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  • Sami N. M Abushammala
  • Jamalludin Sulaiman

Abstract

The paper presents empirical evidences of macroeconomic determinants of cash holdings using panel data of 65 non-financial firms listed in ASE during the period from 2000 to 2011. The results of this study find a partial significant relationship between explanatory macroeconomic variables and corporate cash holdings. The corporate cash holdings related positively with gross domestic production (GDP), and credit spread (CS) as well as government budget deficit and cash (BD).While Inflation (INF) and cash surplus/deficit (SURP) do not determine cash holdings of the firms. This paper extends the existing liquidity literature around the world by using the Fully Modified Ordinary Least Square (FMOLS) method to find out the impact of macroeconomic variables on corporate cash holdings. Also this paper extends the existing liquidity literature the Middle East and Jordan by delivering the macroeconomic variables as a determinant of cash holdings, aside from the traditional firm-specific variables. Moreover, the results of this paper are expected to help the government decision makers, investors and firms’ managers to understand the effects of macroeconomic variables and to hedge against the economic risks and take the right decisions insured the ongoing good performance of the firm.

Suggested Citation

  • Sami N. M Abushammala & Jamalludin Sulaiman, 2014. "Impact of Macroeconomic Performance on Corporate Cash Holdings: Some Evidences from Jordan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(10), pages 1363-1377.
    • Handle: RePEc:asi:aeafrj:v:4:y:2014:i:10:p:1363-1377:id:1264
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    Cited by:

    1. Mahmoud Otaify & Aly Dawood & Mohamed Farouk, 2022. "Optimal Cash Ratio and Adjustment Speed Across Different Firm Characteristics," International Journal of Economics and Financial Issues, Econjournals, vol. 12(3), pages 73-85, May.
    2. YoungHa Ki & Ramesh Adhikari, 2022. "Corporate Cash Holdings and Exposure to Macroeconomic Conditions," IJFS, MDPI, vol. 10(4), pages 1-25, November.
    3. Fryderyk Mirota & Natalia Nehrebecka, 2018. "Determinanty transakcyjnej rezerwy płynności w spółkach giełdowych w Polsce," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 75-102.
    4. Lin Cho-Min & Chien I-Hsin & Chan Min-Lee & Chen Hui-Wen, 2017. "Cash Holdings and Cash Flow Uncertainty," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 7(6), pages 1-3.

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