The Value of Cash Holding and the Financial Crisis : Evidence from Jordan = قيمة النقد المحتفظ به و الأزمة المالية : دليل من الأردن

Abstract

This research has investigated the effect of the recent financial crisis on the value of cash holding among a sample of 80 non-financial listed firms from Jordan during the period 2001-2011. Using fixed-effect panel data analysis, the study has shown that cash is valued at a discount in Jordan since the corporate governance system is weak, investors have poor protection, and free cash flow and agency problems exist. As a result of the financial crisis, external financing has become more difficult and expensive, thus, causing shareholders in Jordan to value cash at a premium since the crisis. Also, considering Jordan as a special setting, debt financing is less preferred for religious reasons, which means that a higher level of cash holding is considered to be positively related to firm value.

Surplus Free Cash Flow, Stock Market Segmentations and Earnings Management: The Moderating Role of Independent Audit Committee

“…This result is inconsistent with some studies conducted in Jordan. example, Alzoubi (2016) offered evidence that ROA was significantly and negatively associated with DAC, while Al Qallap (2014) found no significant relationship between ROA and DAC. The IDUS variable was negatively and significantly related to DAC in all models, which indicates that companies in the industrial sector had a lower positive DAC than those companies in the service sector.…”

“…Alqatamin et al (2017) documented similar findings with a mean of DAC of 0.097. Alzoubi (2016) concluded that the mean of the absolute value of DAC was 9.3 per cent, which indicates that, on an average, the managers of the listed companies on ASE practised earnings management. Finally, Kanakriyah et al (2017) found that public companies in Jordan manipulated the reported earnings at a high level with a mean of 3.772.…”

“…Alnawaiseh et al (2017) indicated that many listed companies have free cash flow, but that only 15 per cent of Jordanian companies employed free cash flow efficiently. Alzoubi (2016) concluded that the free cash flow and agency problems existed among non-financial companies listed on the ASE. In a situation in which a company has a combination of low growth opportunities and a high free cash flow, managements might make poor investment decisions for their benefits, and thus they may be involved in income-boosting discretionary accruals (DAC) to demonstrate the superior performance of a company (Astami et al, 2017).…”

Firm Life Cycle and Cash Policy

“…The existing cash policy in a company is also closely related to the access that can be obtained by the company in obtaining funding sources other than internal funding and the business environment faced by the company (Pinkowitz et al, 2006;Faulkender and Wang, 2006;Dittmar and Mahrt-Smith, 2007;Kalcheva and Lins, 2007;Harford et al, 2008;Fresard and Salva, 2010;Haw et al, 2011;Tong, 2011;Alzoubi, 2013;2015 and2016).…”