Cash management strategies and firm financial performance: A comprehensive literature review

Mustapher Faque
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Mustapher Faque: Ibn Haldun University, Istanbul, Turkey

Bussecon Review of Social Sciences (2687-2285), 2021, vol. 3, issue 4, 23-30

Abstract: Cash(liquidity) management is at the heart of a firm’s financial management. It is a silver lining between the bankruptcy and the success story of a company. Therefore, this study intends to contribute some insights into cash management practices and how firms can use them to achieve sound financial performance. This study provides a comprehensive literature review on existing theories and cash management practices that are useful in decision making. After the analysis of the available literature, the study highlights important theories including trade-off theory (TOT), transaction model, precautionary measures, financial hierarchy, and cash flow theory. Furthermore, management practices such as stochastic cash management model, speeding up cash collections, centralization & decentralization of management, asset portfolio diversification, and cash disbursement are discussed. The study suggests that a sound financial performance can be achieved through a hybrid approach and through adaptation and embracing innovations in cash management systems.

Keywords: Cash (Liquidity); Cash management; cash holding theories; Financial performance (search for similar items in EconPapers)
Date: 2021
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