Impact of macroeconomic performance on corporate cash holdings of selected Philippine Stock Exchange listed service firms

• Main Authors: Cheng, Christine Joy U., Dee, Tiffany Mae C., Tan, Gabrielle Louise C., Tiu, Joseph J.
• Format: text
• Language: English
• Published: Animo Repository 2015
• Subjects: Finance > Philippines; Recessions > Philippines; Cash management > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18365
• Institution: De La Salle University

Ever since the 2007 global financial crisis, firms have been more conservative with cash holdings knowing that having inadequate liquid assets is one of the primary reasons for recessions and financial market collapses. To cope with this, numerous studies have focused on finding microeconomic characteristics that affect corporate cash holdings (CCH) however, Abushammala and Sulaiman (2014) have proven that macroeconomic factors can also be significant indicators. Using data from 2003-2012 across 31 publicly listed service firms in the Philippines and FMOLS, we tested if GDP, credit spread, government budget deficit, inflation and cash surplus are significant factors affecting CCH. Our results show that only government budget deficit and cash significantly affect CCH. Therefore, having only these two macroeconomic factors as the signifant determinants, we found that the best way to control CCH is still through proper allocation of funds.