Abstract
This paper
examines the views of managers of the 250 largest Malaysian companies about the
determinants of corporate cash holdings. Responding managers support the view
that the primary cause for a firm’s cash balances is the accumulation of
internally generated cash flows, not the issuance of new securities; that firms
will generally hold more cash to prevent underinvestment when there is greater
uncertainty in future cash flows; to avoid the risk of financial distress; and
to ensure the ability to invest in new projects when internally-generated cash
flows exhibit high levels of volatility. They also express support for an
optimal trade-off approach to cash holdings.
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