Corporate risk-taking, financial constraints and cash holdings: evidence from Saudi Arabia

Fatima Saleh Abd Almajeed Al-Hamshary, Akmalia Mohamad Ariff, Khairul Anuar Kamarudin and Norakma Abd Majid

International Journal of Islamic and Middle Eastern Finance and Management, 2024, vol. 18, issue 1, 166-183

Abstract: Purpose - This study aims to investigate the association between corporate risk-taking and cash holdings, and whether financial constraints moderate this association. Design/methodology/approach - Regression analyses were applied to 606 firm-year observations from Saudi Arabia from 2011 to 2020. Findings - Firms with higher risk-taking exhibit higher cash holdings, whereas financially constrained firms have lower cash holdings. The positive association between corporate risk-taking and cash holdings is weaker for financially constrained firms than for nonconstrained firms. Practical implications - For investors, investment decisions that include the cash holding assessment would also consider the firm-level uncertainty surrounding the firms. Originality/value - This study explores the joint effect of corporate risk-taking and financial constraints on cash holding, and hence considers the strategic adaptations to navigate uncertainty in strategies related to cash holdings in Saudi Arabia.

Keywords: Risk-taking; Financial constraint; Cash holdings; Saudi Arabia; G18; G38; M41; M43; M44 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-11-2023-0455

DOI: 10.1108/IMEFM-11-2023-0455

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