Optimal Cash Ratio and Adjustment Speed Across Different Firm Characteristics

This paper seeks to use fixed effect and dynamic panel models examine role of firm characteristics, macroeconomic variables, control corruption political uncertainty in explaining cash holdings Egyptian firms over the period 2011 – 2020. We find that characteristics strongly explain variations corporate ratios deviations from target ratios. However, we document no considerable macro variables. tend hold liquid assets as substitutes managing their working capital debt substitute financing operations. The findings support prediction main finance theory both precautionary transactionary motives cash. As expected, more during periods high uncertainty. After sorting according most influential independent variables which are tangibility dividend yield (high low). respond differently specific Specifically, adjust holding optimal level faster than low while firms. results indicate follow a partial adjustment policy towards levels, corresponds with trade off theory.