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Corporate risk-taking, financial constraints and cash holdings: evidence from Saudi Arabia

Author

Listed:
  • Fatima Saleh Abd Almajeed Al-Hamshary
  • Akmalia Mohamad Ariff
  • Khairul Anuar Kamarudin
  • Norakma Abd Majid

Abstract

Purpose - This study aims to investigate the association between corporate risk-taking and cash holdings, and whether financial constraints moderate this association. Design/methodology/approach - Regression analyses were applied to 606 firm-year observations from Saudi Arabia from 2011 to 2020. Findings - Firms with higher risk-taking exhibit higher cash holdings, whereas financially constrained firms have lower cash holdings. The positive association between corporate risk-taking and cash holdings is weaker for financially constrained firms than for nonconstrained firms. Practical implications - For investors, investment decisions that include the cash holding assessment would also consider the firm-level uncertainty surrounding the firms. Originality/value - This study explores the joint effect of corporate risk-taking and financial constraints on cash holding, and hence considers the strategic adaptations to navigate uncertainty in strategies related to cash holdings in Saudi Arabia.

Suggested Citation

  • Fatima Saleh Abd Almajeed Al-Hamshary & Akmalia Mohamad Ariff & Khairul Anuar Kamarudin & Norakma Abd Majid, 2024. "Corporate risk-taking, financial constraints and cash holdings: evidence from Saudi Arabia," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 18(1), pages 166-183, November.
    • Handle: RePEc:eme:imefmp:imefm-11-2023-0455
    DOI: 10.1108/IMEFM-11-2023-0455
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    More about this item

    Keywords

    Risk-taking; Financial constraint; Cash holdings; Saudi Arabia; G18; G38; M41; M43; M44;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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