The impact of internationalization degree on cash levels: evidence from Latin America

Although cash management has been extensively studied, the cash policies of multinational corporations (MNCs) outside of the U.S. market have been underexplored. We fill this gap in the literature by comparing the cash policies of MNCs to those of non-MNCs in a Latin American setting (Argentina, Brazil, Chile, Colombia, Mexico and Peru). Using different proxies for multinationality, we find evidence that the cash holdings of multilatinas are significantly higher than those of their domestic counterparts. Overall, given that foreign markets may offer the best investment opportunities for many MNCs, our results are consistent with the argument that multilatinas maintain higher cash levels to take advantage of the greater growth opportunities abroad. We contribute to the literature on cash management and international business by expanding knowledge regarding the efforts of MNCs in emerging markets. Our results hold following a series of robustness checks and endogeneity concerns.