Cash holdings in Portuguese private firms

Abstract

This paper investigates the corporate cash holdings of private firms in Portugal over the period of 2011 to 2021. Based on a sample of 3,861 firms, the study reveals that private firms tend to hold less cash when they are larger, have higher leverage ratios, higher financial deficits, and superior net working capital. This finding confirms the conventional belief that cash can be seen as negative debt, and that net working capital can be considered a viable substitute for cash. Conversely, the private firms that have higher cash flow volatility, pay dividends, and have a longer cash conversion cycle are found to have a positive relationship with cash reserves. Surprisingly, the study finds no significant relationship between cash holdings and growth opportunities, which contradicts previous research. Furthermore, the study suggests that even private firms with high cash levels tend to delay increasing investments due to limited access to capital markets.

Date of Award	23 Jan 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Diana Bonfim (Supervisor)