Political Instability, Corruption, and Corporate Cash Holdings: Evidence from Africa

18 Pages Posted: 18 May 2021

See all articles by Abdessamad Raghibi

Abdessamad Raghibi

ENCG, Ibn Zohr University

Malik Shabbir

University of Lahore, Pakistan

Date Written: April 1, 2021


This paper aims to investigate how political determinants, namely political instability and the persistence of corruption, impact on corporate cash holding decisions in Africa. We used a sample of 541 listed firms from seven African countries over the period 2014–2019. We used a dynamic panel data regression to identify the relationship between the two political determinants and cash holdings. Our results confirm that political instability is negatively related to cash holdings in accordance with the precautionary motive of cash holdings. Moreover, corruption is positively related to cash holdings, which is consistent with the trade-off theory. Our results suggest that political determinants also have an impact on the cash decisions of African listed firms as they are forced to adjust their cash holdings according to how politically stable the country is. This study contributes to the literature on corporate cash holdings by establishing a conclusive relationship between political instability and corruption, and corporate cash holdings for African countries.

Keywords: Cash holdings, political instability, corruption, Africa

JEL Classification: G30, O16, D72

Suggested Citation

Raghibi, Abdessamad and Shabbir, Malik, Political Instability, Corruption, and Corporate Cash Holdings: Evidence from Africa (April 1, 2021). Available at SSRN: https://ssrn.com/abstract=3848304 or http://dx.doi.org/10.2139/ssrn.3848304

Abdessamad Raghibi (Contact Author)

ENCG, Ibn Zohr University ( email )


Malik Shabbir

University of Lahore, Pakistan

1-KM, Raiwind Road, Lahore, Pakistan
Lahore, Punjab 54000

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