Size Effect On Cash Holdings Of Non-Financial Firms Listed On Psx

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Dr. Lala Rukh, Sangeen khan, Muhammad Sohail, Irfan Ud Din


Size of the firm plays a vital role in the management of cash and cash equivalents; it is the size of the firm that decides about the discretionary powers of the management. Firms with larger size have greater dispersion of the shareholders thus enabling the firms to have more controlling power. This paper aims to find out the size effect on the cash and cash equivalent of the firms of different sizes. In order to carry out the fixed effect regression 356 firms are selected from the non-financial sectors for the period of 2009 to 2019.  The findings demonstrate that companies with larger size, low market to book ratio (MKTB), more cash flows (CF), networking capital, low dividends and minimum debt maturity structure holds more cash. Large sized firms’ shows significantly positive association with cash holdings. Small sized firms has also a positive but insignificant relationship with cash holdings, as the operating procedures and requirement of firms, smaller in size, is less as compared to firms of larger size. While cash holdings significantly influence the firms’ performance.   Small sized companies have a negative and significant impact on the performance while larger firms in size show no significant impact. During the international financial crises the behavior of small and large firms is also studied. The results obtained shows that large sized firms show a highly significant and direct association with cash holdings while small sized companies do not have any significant impact on the cash holdings of the firm.

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