Corporate cash management: Firm level evidence

This dissertation examines corporate cash management in the context of both earnings management practices and investment decisions, and provides firm-level evidence through two different empirical studies. In the analyses, the Generalized Method of Moments (GMM) was employed to address the dynamic nature of the models and potential endogeneity issues. The first empirical study covers non-financial firms listed on the stock exchanges of Istanbul, London, Frankfurt, and São Paulo during the 2011-2021 period, examining the relationship between earnings management and cash holdings. The evidence indicates that earnings management negatively and significantly affects the level of cash holdings, and that this relationship varies across countries and within the context of accounting traditions. In particular, factors such as receivables management, asset quality, and the level of accruals were found to play a role in firms' cash policies. However, for Turkey, the effect of earnings management on cash holdings was not statistically significant. The second empirical study investigates the cash holdings–investment relationship, in the context of financial constraints and the global financial crisis, through non-financial firms listed on Borsa Istanbul and a manufacturing sector subsample over the 2003-2023 period. The evidence reveals that cash has a positive and significant effect on investments; financial constraints suppress investment tendencies; investment-cash holdings sensitivity is relatively weak for unconstrained firms; and the effect of cash on investment weakened in the post-crisis period.