Impact of financial constraints and financial distress on cash holdings

Bukalska Elżbieta () and Maziarczyk Anna
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Bukalska Elżbieta: Faculty of Economics, Maria Curie-Skłodowska University in Lublin, Lublin, Poland.
Maziarczyk Anna: Faculty of Economics, Maria Curie-Skłodowska University in Lublin, Lublin, Poland.

International Journal of Management and Economics, 2023, vol. 59, issue 1, 13-31

Abstract: The aim of the study is to examine the impact of financial constraints and financial distress on cash holdings, both in normal and crisis times. We collected the 4,406 firm-year observations of companies listed on the Warsaw Stock Exchange (WSE). Our research shows that companies maintain higher cash holdings during a crisis than in a normal period. However, in contrast to our expectations, companies with financial difficulties (constraints and distress) have lower cash holdings both in normal and crisis times. The originality of our research lies in realizing that different sources of difficulties might overlap at the same time (external with internal). We also analyze how cash holdings react to a combined impact of difficulties of different natures (external and internal). We believe that cash holdings have recently increased their meaning as we face the situation of constant and increasing uncertainty: still ongoing COVID-19 crisis prolonged with Russian aggression on Ukraine and outburst of inflation.

Keywords: cash holdings; COVID-19 crisis; financial constraints; financial distress; global financial crisis (search for similar items in EconPapers)
JEL-codes: D25 G32 G33 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ijomae:v:59:y:2023:i:1:p:13-31:n:1

DOI: 10.2478/ijme-2022-0032

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