How does excess cash affect corporate financial performance?

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dc.contributor.authorKalash, Ismail
dc.date.accessioned2024-04-24T17:11:22Z
dc.date.available2024-04-24T17:11:22Z
dc.date.issued2024
dc.departmentDicle Üniversitesien_US
dc.description.abstractPurposeThis article analyzes the moderating role of investment opportunities, business risk and agency costs in shaping the nexus between excess cash and corporate performance.Design/methodology/approachThis research uses dynamic regression models (two-step system generalized method of moments) to analyze the data related to 200 Turkish companies listed on Borsa Istanbul (BIST) for the years between 2009 and 2020.FindingsThe findings indicate that when excess cash increases, the financial performance deteriorates only for firms with lower investments compared to firms with more investments. In addition, investment contributes to better financial performance for firms that hold cash surplus, whereas the influence of investment is insignificant for firms that have insufficient cash. Agency costs of equity exacerbate the adverse impact of excess cash on financial performance while agency costs of debt mitigate this effect. Excess cash reduces the financial performance of highly leveraged firms. However, this impact becomes insignificant when debt ratio decreases. The findings also show that investment has more significant role than business risk in building the precautionary motive to hold cash.Research limitations/implicationsThe findings of this article are limited to the Turkish market. Future research is still needed in other emerging markets to compare the results and reveal more about the effect of excess cash on firm performance, and how other factors can change this effect.Practical implicationsThe findings verify the increased significance of excess cash in the presence of investment opportunities and difficulties in accessing external funds. Nevertheless, the role of the equity related agency problem in reducing the benefits of cash surplus confirms the necessity of policies that support corporate governance, especially in emerging markets.Originality/valueThis article, according to the knowledge of author, is the first to examine the role of agency costs associated with debt and equity, and the compound effect of investment opportunities and business risk on the nexus between excess internal funds and corporate financial performance in emerging markets.en_US
dc.identifier.citationKalash, I. (2024). How does excess cash affect corporate financial performance?. Journal of Applied Accounting Research, 1-21.
dc.identifier.doi10.1108/JAAR-08-2023-0231
dc.identifier.issn0967-5426
dc.identifier.issn1758-8855
dc.identifier.scopus2-s2.0-85189487283
dc.identifier.scopusqualityQ1
dc.identifier.urihttps://doi.org/10.1108/JAAR-08-2023-0231
dc.identifier.urihttps://hdl.handle.net/11468/17440
dc.identifier.wosWOS:001198038300001
dc.identifier.wosqualityN/A
dc.indekslendigikaynakWeb of Science
dc.indekslendigikaynakScopus
dc.language.isoenen_US
dc.publisherEmerald Group Publishing Ltden_US
dc.relation.ispartofJournal of Applied Accounting Research
dc.relation.publicationcategoryMakale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanıen_US
dc.rightsinfo:eu-repo/semantics/closedAccessen_US
dc.subjectExcess Cashen_US
dc.subjectFinancial Performanceen_US
dc.subjectInvestment Opportunitiesen_US
dc.subjectBusiness Risken_US
dc.subjectAgency Costsen_US
dc.titleHow does excess cash affect corporate financial performance?en_US
dc.titleHow does excess cash affect corporate financial performance?
dc.typeArticleen_US

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