Moderating effects of institutional ownership on determinants of cash holdings of non-financial firms listed on Nairobi Securities Exchange
Date
2024
Authors
Ongwae, J. K.
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Cash is very crucial for businesses, impacting liquidity, operational flexibility, and strategic decision-making. This study investigates the moderating effects of institutional ownership on determinants of cash holdings in non-financial firms listed on the Nairobi Securities Exchange (NSE), factoring the unprecedented challenges posed by the COVID-19 pandemic. The pandemic has significantly altered the economic landscape, prompting firms to reassess their cash management strategies. The objectives of the study were; to establish the effect of profitability on cash holding of non-financial firms listed on the NSE, to establish the effect of firm size on cash holding of non-financial firms listed on the NSE, to establish the effect of board size on cash holdings of non-financial firms listed on the NSE, to establish the effect of board gender on cash holdings of non-financial firms listed on the NSE, to establish the effect of growth opportunities on cash holdings of non-financial firms listed on the NSE, to establish the effect of dividend payment on cash holdings of non-financial firms listed on the NSE, to determine the moderating effect of institutional ownership on cash holding and the determinants on non-financial firms listed on the NSE. The study used shiftability theory, trade off theory, pecking order and agency theory. The research design used in this study was longitudinal. For the period 2011-2022, a population of 44 non-financial firms listed on the Nairobi Securities Exchange was conducted. Out of the 44 firms, the research managed to get data for 31 firms. The population of the study comprised of agricultural, commercial and services, automobile and accessories, construction and allied, energy and petroleum, investment and services, manufacturing, and real estate investment trusts. Secondary data was derived from yearly reports and financial statements. The methodology applied was Arellano bond dynamic panel data model to test determinants of cash holding using shiftability, the trade off, pecking order and agency theories. The study found firm size had a negative significant relationship with cash holdings that was consistent with shiftability theory while profitability, board size, growth opportunities had a positive significant relationship that were consistent with pecking order, agency, and trade off theory. The study recommends guidelines to be set for different size firms as one-size-fits-all policies may not be suitable, and larger firms might have different liquidity needs compared to smaller ones. The study also recommends enforcement of disclosure requirements that mandate companies to report on the influence of institutional ownership on financial decisions, including cash management.
Description
Full - text thesis
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Citation
Ongwae, J. K. (2024). Moderating effects of institutional ownership on determinants of cash holdings of non-financial firms listed on Nairobi Securities Exchange [Strathmore University]. http://hdl.handle.net/11071/15495