Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Cash Holding and Firm Value in the Presence of Managerial Optimism

Version 1 : Received: 21 June 2021 / Approved: 22 June 2021 / Online: 22 June 2021 (14:03:51 CEST)

How to cite: Habib, A.; Bhatti, M.I.; Khan, M.A.; Azam, Z. Cash Holding and Firm Value in the Presence of Managerial Optimism. Preprints 2021, 2021060542 (doi: 10.20944/preprints202106.0542.v1). Habib, A.; Bhatti, M.I.; Khan, M.A.; Azam, Z. Cash Holding and Firm Value in the Presence of Managerial Optimism. Preprints 2021, 2021060542 (doi: 10.20944/preprints202106.0542.v1).

Abstract

Cash holding is important for Chinese manufacturing firms coping with the increasing cost of financing and stiff market conditions. This study examines the impact of cash holding on the firm value of Chinese manufacturing firms. We find evidence that a non-linear relationship exists between cash holding and firm value in manufacturing firms of China. The study reveals that financially constrained firms having a higher level of cash holding negatively affects the firm value, while the unconstrained firms having a lower level of cash holding positively influences the firm value. Finally, this research is enriched by adopting the novel measure of managerial op-timism and reveals the interactive role of cash holding and optimism on firm value. The study concludes that managerial optimism influences the firm’s cash holding decisions and this is more costly for unconstrained firms.

Subject Areas

Cash holding; firm value; managerial optimism; financial constrained

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