Impact of Cash Flow Uncertainty, Financial Constraints and Accounting Opacity on Cash Holding

Abstract

This study explores the effect of cashflow uncertainty, accounting opacity and financial constraints on corporate cash holdings in non-financial sector of Pakistan. Prior research suggests that firms hold cash for precautionary and transactional motives, yet excessive reserves can lead to agency problems and opportunity cost. Using data from 72 non-financial firm listed on Pakistan Stock Exchange KSE-100 index during 2013-2022, financial data was extracted from the annual reports. Our findings reveals that uncertainty in cash flow positively effect on company’s cash holding. Also, financial constraints have negative impact on cash holdings. Also, size have a significant and negative impact on cash holdings. Likewise, accounting opacity demonstrates a negative effect on cash of holdings. It is highlighted that firm size plays moderating role between all these determinants and cash reserves. The finding of this study contributes valuable insight for policymakers, investors and managers in emerging economies and understanding the concept of cash management practices in emerging markets.