An empirical analysis of the determinants of cash holdings of non-financial Turkish listed companies

Cash holdings have been the root and origin of many business questions and policies. However, the appropriate amount of cash to hold and which factors determine the cash holdings is a question that has gained popularity in academic research over the past decade, but when it comes to studies in Turkey, the literature is limited. This thesis aims to fill that gap in the literature by examining the determinants of cash holdings in Turkey. Possible determinants of cash holdings are derived from the three dominant cash holding theories and the three motives of holding cash. These determinants are then entered into various regression models that test the variations and changes in cash holdings. This study aims to test the determinants of cash holdings using a sample of 191 non-financial Turkish companies listed on the Istanbul Stock Exchange. The regression results show statistically significant positive relationships with cash holdings and dividend payout, company size and profitability. Statistically significant negative relationships with cash holdings were found for leverage, liquid asset substitutions, capital expenditures, company age, investment opportunities and the interest rate and the size of the largest owner?s shares. The combination of these relationships also provides support for the pecking order theory and the agency theory. Keywords: Cash holdings, Financial Determinants, Turkey, Trade-Off Theory, Pecking Order Theory, Agency Theory, Precautionary Motive, Transaction Motive, Tax Motive