Do Factors Affecting Firms' Cash Holdings Differ Across Sectors?: Evidence from Turkiye

Year 2025, Volume: 25 Issue: 1, 189 - 200

İlhan Çam , Boğaçhan Sertuğ Gümrükçü

Abstract

We examine whether the determinants of firms' cash holdings differ across different sectors, such as basic materials, consumer cyclicals, consumer non-cyclicals, energy, healthcare, industrials, real estate, technology, and utilities. Firm-level factors include market-to-book ratio, size, cash flow, net working capital, capital expenditures, leverage, cash flow volatility, R&D expenses, and dividend payment. External factors include periods of economic uncertainty, that is, times of financial crisis. The study's dataset includes 385 firms listed on Borsa Istanbul, Turkiye and 4,375 firm-year observations from 2001 to 2022. Data analysis was conducted using the Driscoll-Kraay robust standard errors panel data estimation method, which ensures unbiased and consistent results despite heteroscedasticity, autocorrelation, and cross-sectional dependence. The findings indicate that variables such as cash flow, net working capital, capital expenditures, leverage, R&D expenses, and dividends are key determinants shaping cash holding behavior in firms within Turkiye as a developing country, regardless of the sector in which these firms operate. Firms increased their cash reserves during the economic uncertainty. Additionally, the market-to-book value ratio and firm size influence cash holding levels differently depending on the sector. In conclusion, although some factors have a consistent impact across various sectors, sector-level analyses reveal unique characteristics and dynamics within each sector that shape the factors influencing firms' cash management strategies.

Keywords

Cash holdings, Cash reserves, Cash management, Sectoral differences, Panel data analysis

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