ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)

Cash Holdings and Firm Characteristics: Evidence from UK Market

Efstathios Magerakis, Costas Siriopoulos and Athanasios Tsagkanos

Correspondence: Athanasios Tsagkanos,

Department of Business Administration, University of Patras, Greece

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This paper investigates the determinants of UK corporate cash holdings during the period 1980-2012. The global and long term phenomenon of corporate cash pilling has drawn significant attention from researchers. Similarly, this study aims at shedding light on the empirical relationship between cash holding and specific firm characteristics. The empirical findings suggest that cash holdings are positively related to investment opportunity, as R&D and market to book ratio. Cash ratio is also positively related to industry cash flow volatility and negatively affected by cash flow, net working capital, capital expenditures, leverage, tax expenses, age and size. Regarding the development of the determinants of cash holdings, the study indicates that three major variables influenced cash holdings over the years of analysis. In particular, leverage, tax regime and capital expenditures significantly affect the corporate liquidity in UK market. Furthermore, the results suggest that cash holdings are mostly defined by trade off theory. Indeed, our findings offer stimulating insights on the factors that determine the firms’ cash holdings during the past three decades.


  Cash holdings, trade-off model, pecking order theory, free cash flow theory, liquid assets.


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