Corporate Cash Holdings and Dividend Payments: Evidence from Simultaneous Analysis

Managerial and Decision Economics, Forthcoming

Posted: 6 Dec 2010

See all articles by Basil Al‐Najjar

Basil Al‐Najjar

University of London - School of Business, Economics and Informatics

Yacine Belghitar

Middlesex University - Business School

Date Written: November 1, 2010

Abstract

This study explores the simultaneous relationship between corporate cash holdings and dividend policy using a large sample of around 400 non-financial firms for the period from 1991 to 2008. The results show that cash holdings are affected by dividends, leverage, growth, size, risk, profitability, and working capital ratio. Dividend policy is affected by cash, leverage, growth, size, risk, and profit. When controlling for simultaneity, dividend payments do not appear to significantly affect cash holdings, nor do cash holdings affect dividend policy. The empirical analysis suggests that simultaneity is crucial in analysing corporate cash holdings and dividend policy

Keywords: Cash Holdings, Dividend Policy, Simultaneous Equations, GMM

Suggested Citation

Al-Najjar, Basil and Belghitar, Yacine, Corporate Cash Holdings and Dividend Payments: Evidence from Simultaneous Analysis (November 1, 2010). Managerial and Decision Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1720351

Basil Al-Najjar

University of London - School of Business, Economics and Informatics ( email )

Malet Street
Bloomsbury
London, WC1E 7HX
United Kingdom

Yacine Belghitar (Contact Author)

Middlesex University - Business School ( email )

The Burroughs
London, NW4 4BT
United Kingdom

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