Cash holdings and SME performance in Europe: the role of firm-specific and macroeconomic moderators
Maurizio La Rocca (),
Raffaele Staglianò (),
Tiziana Rocca (),
Alfio Cariola () and
Ekaterina Skatova ()
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Raffaele Staglianò: Montpellier Business School, Montpellier Research in Management
Tiziana Rocca: University of Messina
Alfio Cariola: University of Calabria
Ekaterina Skatova: University of Calabria
Small Business Economics, 2019, vol. 53, issue 4, No 12, 1078 pages
Abstract For the first time, this paper examines the way in which cash holdings affect firm operating performance in a wide sample of European small and medium-sized enterprises (SMEs). Our results suggest that cash holdings have a positive effect on operating performance, supporting the relevance of precautionary savings motive for SMEs. Maintaining a buffer of money on hand, ready for use in any contingency, has a relevant positive effect that overcomes potential opportunistic problems. Moreover, we find that firm-specific characteristics, such as debt, size, age, growth opportunities, and ownership concentration, moderate our baseline relationship. In addition, the study also demonstrates that cash holdings have a stronger positive effect on operating performance in poorer institutional contexts. Notably, we also find that the stock of cash had a relevant role in supporting firm performance during the recent global financial crisis. Finally, we report additional analyses to corroborate our baseline results.
Keywords: Cash holdings; SMEs; Firm operating performance; Institutional context (search for similar items in EconPapers)
JEL-codes: G32 G33 L26 (search for similar items in EconPapers)
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