Abstract
Purpose:
This study aims to analyze if, during periods of economic recession, the cash position impacts the performance of Brazilian companies. In addition, it seeks to identify if there are differences in the intensity of such relationships for the different sectors in which companies operate.
Originality/value:
The appropriate management of a company’s cash position is key for the maintenance of its financial health in the long term. This subject is particularly relevant for emerging countries, such as Brazil, considering the track record of frequent economic recessions. Such economic recessions lead to the deterioration of the companies’ operating results and shortage of credit facilities, negatively affecting the companies’ liquidity. In the last decade, studies have been discussing the relevance of the companies’ cash position to improve their performance in periods of financial constraint.
Design/methodology/approach:
To develop this study, a sample composed of 200 Brazilian companies listed on B3 was used, grouping information from the period between 2013 and 2016, organized in a balanced dynamic panel.
Findings:
The results obtained through regressions indicate that there is a positive and statistically significant relationship between cash position and the performance of the companies, measured by the return on assets (ROA) – but not by the market to book ratio –, and it was also identified that the sector in which the company operates has a moderating factor on the intensity of such a relationship.
Keywords:
cash position; performance; recession; panel data; sector
Resumo
Objetivo:
O presente trabalho analisa se, em momentos de recessão econômica, a posição de caixa tem impacto na performance das empresas brasileiras. Além disso, busca-se identificar se há diferenças na intensidade dessa relação para os diferentes setores de atuação das empresas.
Originalidade/valor:
A adequada gestão da liquidez das empresas é fundamental para a manutenção da sua saúde financeira e para a sua sustentabilidade econômica em longo prazo. Esse tema é especialmente importante em países emergentes, como o Brasil, que tem um histórico de frequentes recessões econômicas. As recessões levam à piora dos resultados operacionais das empresas e à escassez de linhas de crédito e, portanto, afetam negativamente a liquidez das companhias. Na última década, tem sido discutida a importância do uso de caixa pelas empresas para melhorar sua performance em períodos de restrição financeira.
Design/metodologia/abordagem:
Para desenvolver este estudo, foi utilizada uma amostra de 200 empresas listadas na B3, agrupando informações do período de 2013 a 2016, organizadas em um painel dinâmico balanceado.
Resultados:
Os resultados obtidos por meio das regressões indicam que há relação positiva e estatisticamente significante entre a posição de caixa e a performance medida pelo ROA (mas não pelo market to book). Identificou-se também que o setor de atuação da empresa modera a intensidade dessa relação.
Palavras-chave:
posição de caixa;
performance
; recessão; dados em painel; setor
INTRODUCTION
Studies related to the retention of cash positions by companies have been evolving, and
conclusions have been changing throughout the years. According to the classic theory, the
maintenance of a high cash position with no specific need is detrimental to companies. It poses
inefficiencies to the financial management since there are financial costs and opportunity costs
involved in carrying such a cash position, not creating value to shareholders (Jensen, 1986Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and
takeovers. The American Economic Review, 76(2), 323–329. https://www.jstor.org/stable/1818789
https://www.jstor.org/stable/1818789...
, 1987Jensen, M. C. (1987). The free cash flow theory of takeovers: A financial
perspective on mergers and acquisitions and the economy. “The Merger Boom”, Proceedings
of a Conference Sponsored by Federal Reserve Bank of Boston. 102–143. http://dx.doi.org/10.2139/ssrn.350422
http://dx.doi.org/10.2139/ssrn.350422...
).
However, in accordance with the modern theory, a high cash position is important to ensure that
companies have liquidity when there are uncertainties or risks related to future cash generation
or to provide companies with the capacity to make quick investment decisions (George, 2005George, G. (2005). Slack resources and the performance of privately held firms.
Academy of Management Journal, 48(4), 661–676. https://doi.org/10.5465/amj.2005.17843944
https://doi.org/10.5465/amj.2005.1784394...
; Han & Qiu,
2007Han, S., & Qiu, J. (2007). Corporate precautionary cash holdings.
Journal of Corporate Finance, 13(1), 43–57. https://doi.org/10.1016/j.jcorpfin.2006.05.002
https://doi.org/10.1016/j.jcorpfin.2006....
; Harford et al., 2013Harford, J., Klasa, S., & Maxwell, W. F. (2013). Refinancing risk and cash
holdings. The Journal of Finance, 69(3), 975–1012. https://doi.org/10.1111/jofi.12133
https://doi.org/10.1111/jofi.12133...
; O’Brien & Folta, 2009O’Brien, J. P., & Folta, T. B. (2009). A transaction cost perspective on
why, how and when cash impacts firm performance. Managerial and Decision Economics,
30(7), 465–479. https://doi.org/10.1002/mde.1457
https://doi.org/10.1002/mde.1457...
).
This subject gained additional relevance during the 2008 global financial crisis (Almeida et al., 2014Almeida, H., Campello, M., Cunha, I., & Weisbach, M. S. (2014). Corporate
liquidity management: A conceptual framework and survey. The Annual Review of Financial
Economics, 6, 135–162. https://doi.org/10.1146/annurev-financial-110613-034502
https://doi.org/10.1146/annurev-financia...
), when the United States’ financial
institutions were hit by the subprime mortgage crisis and, facing significant losses,
significantly reduced the offer of credit to companies, which had to rely on their own funds to
fulfill their financial obligations and fund their operations (Adjei, 2013Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
).
As stated by Iquiapaza and Amaral (2008)Iquiapaza, R. A., & Amaral, H. F. (2008). Restrições de financiamento e
política de gestão de caixa nas empresas listadas da Bovespa. Revista de Informação
Contábil, 2(3), 77–89. https://doi.org/10.34629/ric.v2i3.77-89
https://doi.org/10.34629/ric.v2i3.77-89...
, cash
management must be a priority for companies that face financial constraints when their own or
third-party capital is not available at a reasonable cost. The Brazilian market has these
characteristics: 1. concentrated financial market – according to the Brazilian Central Bank
(Banco Central do Brasil, 2017Banco Central do Brasil (2017). http://www.bcb.gov.br/htms/estabilidade/2016_04/refOrg.pdf
http://www.bcb.gov.br/htms/estabilidade/...
) data, the four largest
banks in Brazil are responsible for 75% of the total credit market; 2. capital markets still not
fully developed (Rocca, 2018Rocca, C. A. (2018). Financiamento do investimento no Brasil e o papel
do mercado de capitais. Iedi. https://web.bndes.gov.br/bib/jspui/handle/1408/15840
https://web.bndes.gov.br/bib/jspui/handl...
); and 3. a track record of
frequent financial recessions (Sicsu, 2019Sicsu, J. (2019). Brasil: É uma depressão, não foi apenas uma recessão.
Revista de Economia Contemporânea, 23, 1–41. https://doi.org/10.1590/198055272312
https://doi.org/10.1590/198055272312...
). Thus, we
believe that Brazilian companies should maintain a high cash position as a financial management
tool.
Therefore, this study aims to identify whether a high cash position positively impacts the
performance of Brazilian companies in periods of economic recession. Also, we assessed if the
sector in which companies operate moderates the relationship between cash position and
performance. Compared to similar studies, our study innovates by using different variables to
measure performance and assess a period of financial recession, besides focusing on the
Brazilian market. Studies such as Adjei (2013)Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
analyze the
impact of cash position on the profitability of companies, while we also analyzed its impact on
the share price of companies. Fresard (2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, in turn,
focused on the companies’ growth, not on analyzing a specific period of financial recession.
To develop this study, the database of Economatica was used, encompassing 200 listed Brazilian companies. The methodology applied to this work was based on multiple linear regression with data organized on a balanced dynamic panel. The results indicate that when the performance of the companies is measured based on return on assets (ROA) (but not on the market to book ratio), there is a positive and statistically relevant relationship between the companies’ cash position and their performance. It was also identified that the sector in which companies operate moderates the intensity of such a relationship.
RELATED LITERATURE AND HYPOTHESES
Theories related to cash position
Cash is the set of financial resources held by companies, immediately available for use.
According to Almeida et al. (2014)Almeida, H., Campello, M., Cunha, I., & Weisbach, M. S. (2014). Corporate
liquidity management: A conceptual framework and survey. The Annual Review of Financial
Economics, 6, 135–162. https://doi.org/10.1146/annurev-financial-110613-034502
https://doi.org/10.1146/annurev-financia...
, cash is the main
instrument of liquidity management used by companies. The importance of the maintenance of cash
position by companies has been discussed since Keynes
(1936)Keynes, J. M. (1936). The general theory of employment, interest, and
money. McMillan., aiming at not missing investment opportunities when they are presented. The
amount of cash retention is determined by a series of conditions faced by the companies, such
as cash flow volatility, investment opportunities, or access to credit (Opler et al., 1999Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The
determinants and implications of corporate cash holdings. The Journal of Financial
Economics, 52(1), 3–46. https://doi.org/10.1016/S0304-405X(99)00003-3
https://doi.org/10.1016/S0304-405X(99)00...
).
By balancing costs and benefits, companies should maintain a cash position just enough to
cover their transaction needs (Ferreira & Vilela,
2004Ferreira, M. A., & Vilela, A. S. (2004). Why do firms hold cash? Evidence
from EMU countries. European Financial Management, 10(2), 295–319. https://doi.org/10.1111/j.1354-7798.2004.00251.x
https://doi.org/10.1111/j.1354-7798.2004...
). Amongst the benefits, there is the reduction of transactional costs and the
maintenance of a financial buffer to preserve the company from any market adversity or to fund
investments. In turn, the main cost mentioned is the opportunity cost (explicit and implicit
costs) in maintaining unused financial resources as cash instead of investing them in projects
or investments with positive returns. Jensen (1986)Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and
takeovers. The American Economic Review, 76(2), 323–329. https://www.jstor.org/stable/1818789
https://www.jstor.org/stable/1818789...
argues that any funds in addition to the companies’ optimal cash level generate financial
inefficiencies. One of the central aspects of the author’s study is related to the agency cost,
which refers to the agent (companies’ manager) being able to use the company’s cash surplus for
their own benefit instead of investing in projects that could generate positive results
(wealth) to the principal (shareholder). Based on The Free Cash Flow Theory, the author
mentions that companies must maintain a cash position that is just enough to meet their
short-term financial obligations and to invest in projects that create value (positive net
present value) for the company. If the company is managed in an efficient way and seeks to
maximize shareholders’ value, any positive cash flow should be distributed to shareholders in
the form of dividends.
The Pecking Order theory (Myers, 1984Myers, S. C. (1984). The capital structure puzzle. The Journal of
Finance, 39(3), 574–592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x
https://doi.org/10.1111/j.1540-6261.1984...
), based on the
assumption of asymmetry of information between the companies’ management and market agents,
suggests that companies follow a hierarchical order to fund their investments, namely: 1. the
use of their retaining earnings (earnings that remain in the company in the form of cash of
financial investments); 2. debt; and 3. attraction of new equity. Cash would play a moderating
factor between the company’s retained earnings and investment needs. Myers (1984)Myers, S. C. (1984). The capital structure puzzle. The Journal of
Finance, 39(3), 574–592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x
https://doi.org/10.1111/j.1540-6261.1984...
demonstrated that, from 1973 to 1982, 62% of the capital
investments performed by United States’ companies were financed by the companies’ own cash
position.
However, Almeida et al. (2014)Almeida, H., Campello, M., Cunha, I., & Weisbach, M. S. (2014). Corporate
liquidity management: A conceptual framework and survey. The Annual Review of Financial
Economics, 6, 135–162. https://doi.org/10.1146/annurev-financial-110613-034502
https://doi.org/10.1146/annurev-financia...
argue that the
perception of the costs and benefits of maintaining a high cash position can vary depending on
the company, the sector in which it operates, and the market conditions, and, thus, it may
significantly change management’s understanding related to the optimum level of cash position
for a given company.
The 2008 global financial crisis and its impacts on the companies, such as the reduction in
the credit offered by the financial institutions, contributed to the development of new
approaches to this subject, with a particular focus on the relationship between the maintenance
of a high cash position and performance of the companies. In this regard, Nason and Patel (2016)Nason, R. S., & Patel, P. C. (2016). Is cash king? Market performance and
cash during a recession. Journal of Business Research, 69(10), 4242–4248.
https://doi.org/10.1016/j.jbusres.2016.03.001
https://doi.org/10.1016/j.jbusres.2016.0...
argue that there are costs and benefits for companies
in maintaining a high cash position and that, during periods of recessions, these effects are
more pronounced. If, on the one hand, the maintenance of a high cash position protects
companies, on the other, it prevents companies from investing in new business
opportunities.
Empirical evidence
Given the relevance of this subject to the liquidity management of the companies, research
indicates that 1. there are determinant factors in the maintenance of cash position, such as
growth opportunities, investments in research and development, cash flow volatility,
precautionary and macroeconomic factors (Chen & Mahajan,
2010Chen, N., & Mahajan, A. (2010). Effects of macroeconomic conditions on
corporate liquidity – international evidence. International Research Journal of Finance
and Economics, 35, 112–129. https://www.efmaefm.org/0efmameetings/EFMA%20ANNUAL%20MEETINGS/2008-Athens/papers/Mahajan.pdf
https://www.efmaefm.org/0efmameetings/EF...
; Dutra et al., 2018Dutra, V. R., Sonza, I. B, Ceretta, P. S., & Galli, O. C. (2018).
Determinants of cash retention in Brazilian companies: An analysis after the 2008 crisis.
Journal of Education and Research in Accounting, 12(3), 349–363. https://doi.org/10.17524/repec.v12i3.1808
https://doi.org/10.17524/repec.v12i3.180...
; Ferreira & Vilela, 2004Ferreira, M. A., & Vilela, A. S. (2004). Why do firms hold cash? Evidence
from EMU countries. European Financial Management, 10(2), 295–319. https://doi.org/10.1111/j.1354-7798.2004.00251.x
https://doi.org/10.1111/j.1354-7798.2004...
; Harford et al.,
2008Harford, J., Mansi, S. A., & Maxwell, W. F. (2008). Corporate governance and
firm cash holdings in the US. Journal of Financial Economics, 87(3), 535–555.
https://doi.org/10.1016/j.jfineco.2007.04.002
https://doi.org/10.1016/j.jfineco.2007.0...
; Opler et al., 1999Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The
determinants and implications of corporate cash holdings. The Journal of Financial
Economics, 52(1), 3–46. https://doi.org/10.1016/S0304-405X(99)00003-3
https://doi.org/10.1016/S0304-405X(99)00...
; Ozkan & Ozkan, 2004Ozkan, A., & Ozkan, N. (2004). Corporate cash holdings: An empirical
investigation of UK companies. Journal of Banking and Finance, 28(9),
2103–2134. https://doi.org/10.1016/j.jbankfin.2003.08.003
https://doi.org/10.1016/j.jbankfin.2003....
; Ranajee &
Pathak, 2019Ranajee, R., & Pathak, R. (2019). Corporate cash holding during crisis and
beyond: What matters the most. International Journal of Managerial Finance,
15(4), 492–510. https://doi.org/10.1108/IJMF-03-2018-0085
https://doi.org/10.1108/IJMF-03-2018-008...
), and 2. there are costs and benefits for companies in maintaining high
cash position (Kim & Bettis, 2013Kim, C., & Bettis, R. A. (2013). Cash is surprisingly valuable as a
strategic asset. Strategic Management Journal, 35(13), 2053–2063. https://doi.org/10.1002/smj.2205
https://doi.org/10.1002/smj.2205...
). The
precautionary factors were also observed in Brazilian companies by Carracedo (2010)Carracedo, A. (2010). Determinantes da reserva de caixa das empresas
brasileiras. [Dissertação de mestrado não publicada]. Fundação Getulio Vargas.
http://hdl.handle.net/10438/8241
http://hdl.handle.net/10438/8241...
, Iquiapaza and Amaral
(2008)Iquiapaza, R. A., & Amaral, H. F. (2008). Restrições de financiamento e
política de gestão de caixa nas empresas listadas da Bovespa. Revista de Informação
Contábil, 2(3), 77–89. https://doi.org/10.34629/ric.v2i3.77-89
https://doi.org/10.34629/ric.v2i3.77-89...
, and Manoel et al. (2017)Manoel, A. A. S., Moraes, M. B. D. C., Santos, D. F. L., & Neves, M. F.
(2017). Determinants of corporate cash holdings in times of crisis: Insights from Brazilian
sugarcane industry private firms. International Food and Agribusiness Management
Review, 21(2), 201–218. http://dx.doi.org/10.22434/IFAMR2017.0062
http://dx.doi.org/10.22434/IFAMR2017.006...
, who concluded
that cash management is a priority for companies facing financial constraints. Opler et al. (1999)Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The
determinants and implications of corporate cash holdings. The Journal of Financial
Economics, 52(1), 3–46. https://doi.org/10.1016/S0304-405X(99)00003-3
https://doi.org/10.1016/S0304-405X(99)00...
focused their study on United States’
companies, Ozkan and Ozkan (2004)Ozkan, A., & Ozkan, N. (2004). Corporate cash holdings: An empirical
investigation of UK companies. Journal of Banking and Finance, 28(9),
2103–2134. https://doi.org/10.1016/j.jbankfin.2003.08.003
https://doi.org/10.1016/j.jbankfin.2003....
researched companies
in the United Kingdom, Ferreira and Vilela (2004)Ferreira, M. A., & Vilela, A. S. (2004). Why do firms hold cash? Evidence
from EMU countries. European Financial Management, 10(2), 295–319. https://doi.org/10.1111/j.1354-7798.2004.00251.x
https://doi.org/10.1111/j.1354-7798.2004...
studied companies in the European Monetary Union (EMU) countries, while Ranajee and Pathak (2019)Ranajee, R., & Pathak, R. (2019). Corporate cash holding during crisis and
beyond: What matters the most. International Journal of Managerial Finance,
15(4), 492–510. https://doi.org/10.1108/IJMF-03-2018-0085
https://doi.org/10.1108/IJMF-03-2018-008...
researched companies in India. The conclusions of
the first three studies are similar, pointing out that the company’s cash position is
positively related to companies’ growth opportunities and investments. However, Ranajee and Pathak (2019)Ranajee, R., & Pathak, R. (2019). Corporate cash holding during crisis and
beyond: What matters the most. International Journal of Managerial Finance,
15(4), 492–510. https://doi.org/10.1108/IJMF-03-2018-0085
https://doi.org/10.1108/IJMF-03-2018-008...
did not find evidence related to
the Indian companies’ growth opportunities. All the studies identified that companies that
operate in sectors with higher volatility over cash flows tend to preserve a higher position in
liquid assets, such as cash. Although MacKay and Phillips
(2005)MacKay, P. , & Phillips, G. M. (2005). How does industry affect firm
financial structure? The Review of Financial Studies, 18(4), 1433–1466.
https://doi.org/10.1093/rfs/hhi032
https://doi.org/10.1093/rfs/hhi032...
point out the higher importance of the specific characteristics of companies,
they also found evidence of the relevant role of the sector in which the company operates to
explain the firm’s capital structure.
In Brazil, Carracedo (2010)Carracedo, A. (2010). Determinantes da reserva de caixa das empresas
brasileiras. [Dissertação de mestrado não publicada]. Fundação Getulio Vargas.
http://hdl.handle.net/10438/8241
http://hdl.handle.net/10438/8241...
concluded that a company’s
cash position is related to the amount of short-term debt that the company has, and, therefore,
the main reason for maintaining a high cash position is precaution. Dutra et al. (2018)Dutra, V. R., Sonza, I. B, Ceretta, P. S., & Galli, O. C. (2018).
Determinants of cash retention in Brazilian companies: An analysis after the 2008 crisis.
Journal of Education and Research in Accounting, 12(3), 349–363. https://doi.org/10.17524/repec.v12i3.1808
https://doi.org/10.17524/repec.v12i3.180...
observe that this motivation is only relevant to sizable
companies. Iquiapaza and Amaral (2008)Iquiapaza, R. A., & Amaral, H. F. (2008). Restrições de financiamento e
política de gestão de caixa nas empresas listadas da Bovespa. Revista de Informação
Contábil, 2(3), 77–89. https://doi.org/10.34629/ric.v2i3.77-89
https://doi.org/10.34629/ric.v2i3.77-89...
and Manoel et al. (2017)Manoel, A. A. S., Moraes, M. B. D. C., Santos, D. F. L., & Neves, M. F.
(2017). Determinants of corporate cash holdings in times of crisis: Insights from Brazilian
sugarcane industry private firms. International Food and Agribusiness Management
Review, 21(2), 201–218. http://dx.doi.org/10.22434/IFAMR2017.0062
http://dx.doi.org/10.22434/IFAMR2017.006...
concluded that cash management must be a
priority for companies facing financial constraints when their own resources or third-party
funding are not available at a reasonable cost.
Simutin (2010)Simutin, M. (2010). Excess cash and stock returns. Financial Management,
39(3), 1197–1222. https://doi.org/10.1111/j.1755-053X.2010.01109.x
https://doi.org/10.1111/j.1755-053X.2010...
demonstrates that companies maintain
cash reserves in anticipation of investments that promote growth. Kim and Bettis (2013)Kim, C., & Bettis, R. A. (2013). Cash is surprisingly valuable as a
strategic asset. Strategic Management Journal, 35(13), 2053–2063. https://doi.org/10.1002/smj.2205
https://doi.org/10.1002/smj.2205...
confirm this conclusion and state that a high cash
position plays a relevant role as a strategic asset since it can be used by companies to ensure
the continuity of investments in research and development, contributing to innovation.
Regarding the impact of cash position on the performance of companies, Deb et al. (2017)Deb, P., David, P., & O’Brien, J. P. (2017). When is cash good or bad for
firm performance? Strategic Management Journal, 38(2), 436–454. https://doi.org/10.1002/smj.2486
https://doi.org/10.1002/smj.2486...
, Faulkender and Wang
(2006)Faulkender, M., & Wang, R. (2006). Corporate financial policy and the value
of cash. The Journal of Finance, 61(4), 1957–1990. https://doi.org/10.1111/j.1540-6261.2006.00894.x
https://doi.org/10.1111/j.1540-6261.2006...
, Fresard (2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, Mikkelson and Partch (2003)Mikkelson, W. H., & Partch, M. M. (2003). Do persistently large cash
reserves hinder performance? Journal of Financial and Quantitative Analysis,
38(2), 275–294. https://doi.org/10.2307/4126751
https://doi.org/10.2307/4126751...
, and O’Brien and
Folta (2009)O’Brien, J. P., & Folta, T. B. (2009). A transaction cost perspective on
why, how and when cash impacts firm performance. Managerial and Decision Economics,
30(7), 465–479. https://doi.org/10.1002/mde.1457
https://doi.org/10.1002/mde.1457...
argue that the maintenance of a high cash position is positively related
to the performance (measured mainly by ROA) and market value of companies (measured by the
Tobin’s Q or the market to book) and generates value to shareholders. This occurs mainly when
cash is held and used for the company’s adaptation to a number of market situations that can
lead to investment needs or pressure their liquidity. Deb et
al. (2017)Deb, P., David, P., & O’Brien, J. P. (2017). When is cash good or bad for
firm performance? Strategic Management Journal, 38(2), 436–454. https://doi.org/10.1002/smj.2486
https://doi.org/10.1002/smj.2486...
determined three situations in which adaptation is most relevant: fierce
competition, industry growth, and intensity of research funding and investments.
Several studies analyzed the companies’ cash position and its determinants and impact on
performance during the 2008 global financial crisis. Adjei
(2013)Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
argues that during the recession, companies’ cash generation capacity is
compromised. Thus, companies must rely on their cash position or external funds – which, in
recession periods, are scarce and expensive – to finance their operations. For that study, the
author used the companies’ cash position in 2006 – the last fiscal year before the recession,
which started in August 2007 – and compared the 2006 company’s ROA and the 2008 company’s ROA.
In this case, the reduction in the ROA was more intense for companies with low cash positions
before the recession than for companies with high cash positions, meaning that the firms’
performance was indeed impacted, but on different levels depending on the cash position held
prerecession. The author concluded that cash reserves help firms to maintain better financial
health and reduce bankruptcy risks during recession. Chang et
al. (2017)Chang, Y., Benson, K., & Faff, R. (2017). Are excess cash holdings more
valuable to firms in times of crisis? Financial constraints and governance matters.
Pacific-Basin Finance Journal, 45, 157–173. https://doi.org/10.1016/j.pacfin.2016.05.007
https://doi.org/10.1016/j.pacfin.2016.05...
assessed the impact of maintaining a cash position before and after the 2008
global financial crisis and found evidence that the maintenance of a cash position adds more
value during the crisis and for companies with deeper financial constraints. Nason and Patel (2016)Nason, R. S., & Patel, P. C. (2016). Is cash king? Market performance and
cash during a recession. Journal of Business Research, 69(10), 4242–4248.
https://doi.org/10.1016/j.jbusres.2016.03.001
https://doi.org/10.1016/j.jbusres.2016.0...
affirm that the value that the cash
position adds depends on the amount of cash held. Chen et al.
(2018)Chen, H.-C., Chou, R. K., & Lu, C.-L. (2018). Saving for a rainy day:
Evidence from the 2000 dot-com crash and the 2008 credit crisis. Journal of Corporate
Finance, 48, 680–699. https://doi.org/10.1016/j.jcorpfin.2017.12.025
https://doi.org/10.1016/j.jcorpfin.2017....
analyzed companies with financial constraints and found evidence that those that
held excess cash presented higher returns and lower bankruptcy risks after the 2000 and 2008
crises in the United States’ market. They also found learning evidence, meaning that companies
that were affected due to the lack of cash position in the 2000 recession presented a higher
level of cash balance before the 2008 recession.
Overall, the existing literature related to the relationship between the companies’ cash
position and performance is based mainly on studies focused on the United States’ market, and
there is little research on this subject focused on the Brazilian market. Forti et al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
, relying on Fresard
(2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, studied Brazilian companies listed between 1995 and 2009 and identified that
performance, measured by ROA and market value (market to book ratio), was positively affected
by the company’s cash position. This conclusion is similar to Pamplona, Silva, and Nakamura’s (2019)Pamplona, E., Silva, T. P. da, & Nakamura, W. T. (2019). Influência da folga
financeira no desempenho econômico de empresas industriais brasileiras e mexicanas.
Estudios Gerenciales, 35(153), 399–415. https://doi.org/10.18046/j.estger.2019.153.3366
https://doi.org/10.18046/j.estger.2019.1...
, who concluded that financial slack positively
impacts performance, measured by ROA, return on equity (ROE), and return on sales. Pamplona, Silva, Nakamura, and Rodrigues Junior (2019)Pamplona, E., Silva, T. P. da, Nakamura, W. T. , & Rodrigues Junior, M. M.
(2019). Influência da folga financeira no desempenho econômico de empresas familiares e não
familiares brasileiras. Contabilidade Vista & Revista, 30(1), 43–67.
https://revistas.face.ufmg.br/index.php/contabilidadevistaerevista/article/view/4590
https://revistas.face.ufmg.br/index.php/...
also
found similar evidence pointing out differences in this relationship between family-owned and
non-family companies.
However, there are few studies, such as Adjei (2013)Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
,
that researched this relationship in periods of recession. Although Pamplona, Silva, and Nakamura (2019)Pamplona, E., Silva, T. P. da, & Nakamura, W. T. (2019). Influência da folga
financeira no desempenho econômico de empresas industriais brasileiras e mexicanas.
Estudios Gerenciales, 35(153), 399–415. https://doi.org/10.18046/j.estger.2019.153.3366
https://doi.org/10.18046/j.estger.2019.1...
and Pamplona, Silva, Nakamura, and Rodrigues Junior (2019)Pamplona, E., Silva, T. P. da, Nakamura, W. T. , & Rodrigues Junior, M. M.
(2019). Influência da folga financeira no desempenho econômico de empresas familiares e não
familiares brasileiras. Contabilidade Vista & Revista, 30(1), 43–67.
https://revistas.face.ufmg.br/index.php/contabilidadevistaerevista/article/view/4590
https://revistas.face.ufmg.br/index.php/...
have also used a recent set of
data, there was no special attention to recession periods. In Brazil, the focus of this study,
economic recessions, is frequent. According to data from the Comitê de Datação de Ciclos
Econômicos – Codace (Fundação Getulio Vargas, 2021Fundação Getulio Vargas (2021). Comunicado de Datação de Ciclos Mensais.
https://portalibre.fgv.br/node/1776
https://portalibre.fgv.br/node/1776...
),
since 1980, Brazil has been through nine periods of recession, the last one being the most
intense, lasting from the second quarter of 2014 to the last quarter of 2016 – and its impacts
remained until 2017. Table 1 details the periods of
economic recession and expansion that Brazil has been through from 1981 to 2016. This track
record suggests that Brazil faces, on average, one period of recession every four years.
Considering that the Brazilian companies’ access to credit is more restricted than that of
companies in developed markets, Brazilian companies face the risk of a lack of access to credit
to fund their working capital, investments, or even to refinance maturing debt, mainly in
periods of economic recession. In line with the results obtained by Opler et al. (1999)Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The
determinants and implications of corporate cash holdings. The Journal of Financial
Economics, 52(1), 3–46. https://doi.org/10.1016/S0304-405X(99)00003-3
https://doi.org/10.1016/S0304-405X(99)00...
and Harford et al.
(2008)Harford, J., Mansi, S. A., & Maxwell, W. F. (2008). Corporate governance and
firm cash holdings in the US. Journal of Financial Economics, 87(3), 535–555.
https://doi.org/10.1016/j.jfineco.2007.04.002
https://doi.org/10.1016/j.jfineco.2007.0...
, it is expected that Brazilian companies held a high cash position as a
precaution to protect themselves from occasional recessions that could impair their future cash
generation and their capacity to access credit to fund their operations or refinance existing
debt.
Hypotheses
In this context, this study has the purpose of analyzing the relationship between the cash
position of Brazilian companies and their performance during periods of economic recession. It
is also observed whether the sector in which the companies operate is a moderating factor for
the intensity of the relationship between the company’s cash position and its performance. This
study is based on the methodologies used by Adjei (2013)Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
,
Forti et al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
, Fresard (2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, and Talberg et al. (2008)Talberg, M., Winge, C., Frydenberg, S., & Westgaard, S. (2008). Capital
structure across industries. International Journal of the Economics of Business,
15(2), 181–200. https://doi.org/10.1080/13571510802134304
https://doi.org/10.1080/1357151080213430...
.
According to Keynes (1936)Keynes, J. M. (1936). The general theory of employment, interest, and
money. McMillan., the maintenance of cash
poses both transaction and precautionary benefits. As precautionary benefits, cash enables
companies to invest in business opportunities even in moments of volatility in cash flow
generation or periods of crisis when third-party funds are scarce (Opler et al., 1999Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The
determinants and implications of corporate cash holdings. The Journal of Financial
Economics, 52(1), 3–46. https://doi.org/10.1016/S0304-405X(99)00003-3
https://doi.org/10.1016/S0304-405X(99)00...
), and the transactional benefits are related to higher
liquidity, fewer efforts needed to raise funds, and lower cost of debt (Keynes, 1936Keynes, J. M. (1936). The general theory of employment, interest, and
money. McMillan.). Thus, the expectation is that a positive relationship exists
between the maintenance of an elevated cash position and the companies’ performance during
periods of economic recession, as, in these situations, it is expected that companies that have
higher liquidity have greater bargaining power when negotiating with suppliers and clients, so
that these companies would have more access to credit under more reasonable terms (Ivashina & Scharfstein, 2010Ivashina, V. , & Scharfstein, D. (2010). Bank lending during the financial
crisis of 2008. Journal of Financial Economics, 97(3), 319–338. https://doi.org/10.1016/j.jfineco.2009.12.001
https://doi.org/10.1016/j.jfineco.2009.1...
).
-
H1: During periods of economic recession, the greater the cash position, the better the performance of Brazilian companies.
It is important to note that the impact of cash position on the companies’ performance may
vary according to the sector in which they operate. According to the theory proposed by Maksimovic et al. (1999)Maksimovic, V., Stomper, A., & Zechner, J. (1999). Capital structure,
information acquisition and investment decisions in an industry framework. Review of
Finance, 2(3), 251–271. https://doi.org/10.1023/A:1009825432146
https://doi.org/10.1023/A:1009825432146...
, differences in the predictability
of costs and demand between the different sectors end up determining different capital
structures for companies. As stated by Talberg et al.
(2008)Talberg, M., Winge, C., Frydenberg, S., & Westgaard, S. (2008). Capital
structure across industries. International Journal of the Economics of Business,
15(2), 181–200. https://doi.org/10.1080/13571510802134304
https://doi.org/10.1080/1357151080213430...
, each sector experiences a different economic and competitive environment. For
example, a sector that is naturally more volatile and that has uncertain cash flows or a sector
that is more intense in capital investments may benefit from the maintenance of a higher cash
position than a sector with lower volatility or less capital investments. Therefore, it is
expected that the moderating factor played by the sector in which the companies operate will be
confirmed.
-
H2: The sector in which companies operate moderates the relationship between cash position and performance.
METHODOLOGY
This section of the study presents the data, variables, and methodology used to test the hypotheses elaborated in the previous section.
Database
The period analyzed in this study was determined based on the methodology adopted by Adjei (2013)Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
, who established as the starting point the fiscal
year ended immediately before the economic recession, aiming to observe the evolution of the
companies’ results during the entire period of the recession, and, as the final point of
analysis, the author used the fiscal year of the recession. Considering that, according to
Codace (Fundação Getulio Vargas, 2021Fundação Getulio Vargas (2021). Comunicado de Datação de Ciclos Mensais.
https://portalibre.fgv.br/node/1776
https://portalibre.fgv.br/node/1776...
), the most recent
economic recession in Brazil started in the second quarter of 2014 and lasted until the fourth
quarter of 2016, this study analyzes data from 2013 to 2016 (four years).
The sample was extracted from the Economatica database. At first, information from all the
340 companies listed on the São Paulo Stock Exchange was collected. To reach the final sample,
the database was adjusted according to the following criteria: financial companies, banks, and
insurance companies were excluded from the database, since, according to Talberg et al. (2008)Talberg, M., Winge, C., Frydenberg, S., & Westgaard, S. (2008). Capital
structure across industries. International Journal of the Economics of Business,
15(2), 181–200. https://doi.org/10.1080/13571510802134304
https://doi.org/10.1080/1357151080213430...
, companies from these sectors operate under a specific
regulatory environment that directly impacts their capital structure, thus, jeopardizing
comparison with the remaining companies. Holding companies were excluded since the calculation
of the model variables would be distorted for these type of company, as they are used as a
vehicle to hold participation in other operating companies, in which most of the group’s
assets, results, and debt are accounted for. Besides, some of the operating companies held by
the holdings are also listed, which would lead to duplicates.
Finally, companies that did not have the datasets for the four years of observation were excluded, which could happen if a company was listed or delisted during the observed period or if the company ceased operations and, thus, ceased to present operational results. The reason for considering only companies that had complete datasets for the analyzed period is to use a balanced panel, further discussed in the next section.
After this first screening in the database, outliers were also excluded. Considering that many companies were affected by the recession, which is exactly what this study aims to analyze, the selection of the outliers was made carefully to prevent the exclusion of valid information. Therefore, companies that had significant variations in their results were considered outliers, regardless of their operational performance or market situations. Thus, four outliers were excluded, such as Refinaria de Petróleo Manguinhos S. A., which was being indicted due to corruption allegations and, thus, had its operational licenses revoked by the government. After all the adjustments, the final database was composed of 200 companies and a total of 800 observations (companies/year) for each variable. Table 2 shows the screening in the database.
For the classification of the sectors, it was adopted the standard classification used by the
São Paulo Stock Exchange, with some adjustments, as proposed by Zarowny (2016)Zarowny, C. A. (2016). Impacto da gestão de capital de giro na
lucratividade das firmas brasileiras em diferentes ciclos econômicos. [Dissertação de
mestrado não publicada]. Insper. https://repositorio.insper.edu.br/bitstream/11224/1719/3/Cynthia%20Azevedo%20Zarowny_Trabalho.pdf
https://repositorio.insper.edu.br/bitstr...
. The oil, gas, and biofuels and the telecommunications sectors were
grouped together with “public utility”, and the information technology sector was included in
“others” due to the low number of companies from this sector in the sample. Therefore, the 200
companies analyzed were grouped into the following sectors: 1. basic materials, 2. industry, 3.
consumers, 4. health, 5. public utility, and 6. others.
Variables
The dependent variable is the companies’ performance, measured by two of the main ratios used
for company value. Thus, the performance indicator varies between ROA, which measures the
operational performance, as studied by Adjei (2013)Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
,
Forti et al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
, and Fresard (2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, and market to book ratio, which measures the market value of
the companies, as studied by Deb et al. (2017)Deb, P., David, P., & O’Brien, J. P. (2017). When is cash good or bad for
firm performance? Strategic Management Journal, 38(2), 436–454. https://doi.org/10.1002/smj.2486
https://doi.org/10.1002/smj.2486...
, Forti et al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
, Fresard
(2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, Kim and Bettis (2013)Kim, C., & Bettis, R. A. (2013). Cash is surprisingly valuable as a
strategic asset. Strategic Management Journal, 35(13), 2053–2063. https://doi.org/10.1002/smj.2205
https://doi.org/10.1002/smj.2205...
, and O’Brien and Folta (2009)O’Brien, J. P., & Folta, T. B. (2009). A transaction cost perspective on
why, how and when cash impacts firm performance. Managerial and Decision Economics,
30(7), 465–479. https://doi.org/10.1002/mde.1457
https://doi.org/10.1002/mde.1457...
.
The ROA is calculated based on the Ebitda divided by the total assets of the company.
According to Forti et al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
, this definition of ROA
was used in order not to account for the way that the assets were financed since Ebitda is
commonly used as a proxy for operational cash generation, that is, before accounting for the
companies’ financial income and financial expenses accounts.
For the market value of companies, it was used the market to book ratio, which, according to
Talberg et al. (2008)Talberg, M., Winge, C., Frydenberg, S., & Westgaard, S. (2008). Capital
structure across industries. International Journal of the Economics of Business,
15(2), 181–200. https://doi.org/10.1080/13571510802134304
https://doi.org/10.1080/1357151080213430...
, is calculated by dividing the
companies’ market value (share price multiplied by number of shares) by the book value
(accounting value) of the company. This indicator represents the market value assigned to a
company. In accordance with Deb et al. (2017)Deb, P., David, P., & O’Brien, J. P. (2017). When is cash good or bad for
firm performance? Strategic Management Journal, 38(2), 436–454. https://doi.org/10.1002/smj.2486
https://doi.org/10.1002/smj.2486...
and O’Brien and Folta (2009)O’Brien, J. P., & Folta, T. B. (2009). A transaction cost perspective on
why, how and when cash impacts firm performance. Managerial and Decision Economics,
30(7), 465–479. https://doi.org/10.1002/mde.1457
https://doi.org/10.1002/mde.1457...
, the market to book variable is
important as it captures the costs and benefits of the maintenance of the cash for
shareholders, and its value incorporates market expectations related to the companies’ results
and future growth perspectives.
The independent variable is the standardized cash position of companies. Defined in this
study as its definition is based on the methodology used by Forti et al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
and Fresard
(2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
. Given that the aim is to observe if companies have better or worse performance
than their peers depending on the cash position, it is important to balance and standardize
this variable according to the sector in which the company operates. Companies’ cash position
was obtained in the Economatica database by summing “cash” and “cash equivalents” accounts
reported in their financial statements. Then, the ratio of the cash position over the total
assets of each company was calculated. Out of this result, it was subtracted the average ratio
of the sector in which the company operates. The result was then divided by the standard
deviation of the sector.
Also, the one-year lagged data are used, meaning that the data refer to the year immediately
before the observed year, since the impact of the cash position on the companies’ performance
could not be measured simultaneously to the current value of the dependent variables (Forti et al., 2011Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
). Equation 1 illustrates the construction of this variable.
In line with the studies of Adjei (2013)Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
, Deb et al. (2017)Deb, P., David, P., & O’Brien, J. P. (2017). When is cash good or bad for
firm performance? Strategic Management Journal, 38(2), 436–454. https://doi.org/10.1002/smj.2486
https://doi.org/10.1002/smj.2486...
, Forti et
al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
, Fresard (2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, Kim and Bettis (2013)Kim, C., & Bettis, R. A. (2013). Cash is surprisingly valuable as a
strategic asset. Strategic Management Journal, 35(13), 2053–2063. https://doi.org/10.1002/smj.2205
https://doi.org/10.1002/smj.2205...
, and O’Brien and Folta (2009)O’Brien, J. P., & Folta, T. B. (2009). A transaction cost perspective on
why, how and when cash impacts firm performance. Managerial and Decision Economics,
30(7), 465–479. https://doi.org/10.1002/mde.1457
https://doi.org/10.1002/mde.1457...
, the control variables used were 1. size of the company
(“size”), 2. indebtedness (“leverage”), 3. investments (“investments”), 4. sales growth (“Δ
growth”), 5. distribution of profits (“payout”), and 6. sectors in which the companies operate
(“sectors”). According to Kim and Bettis (2013)Kim, C., & Bettis, R. A. (2013). Cash is surprisingly valuable as a
strategic asset. Strategic Management Journal, 35(13), 2053–2063. https://doi.org/10.1002/smj.2205
https://doi.org/10.1002/smj.2205...
, the
control variables were selected since they relate specifically to the impact of the cash
position on the performance of the companies. Also, for the model that uses the market to book
indicator as the dependent variable, it was included the variation of the São Paulo Stock
Exchange index as a control variable, aiming at capturing the variations of the stock market
during the period of the analysis.
In this study, it was decided to follow the methodology used by Forti et al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
and Fresard
(2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, which uses control variables with a one-year lag and standardized by their
corresponding sector averages. The ROA and market to book variables were also used with a
one-year lag to control the time persistence in the regression (Lemmon et al., 2008Lemmon, M. L., Roberts, M. R., & Zender, J. F. (2008). Back to the
beginning: Persistence and the cross-section of corporate capital structure. The
Journal of Finance, 63(4), 1575–1608. https://doi.org/10.1111/j.1540-6261.2008.01369.x
https://doi.org/10.1111/j.1540-6261.2008...
). For 2013, the variables were lagged by using data from 2012 to
preserve the size of the sample. To ensure the consistency of the estimators, the second lag
(two-year lag) of each variable was used as an instrumental variable of the first lag (Wooldridge, 2004/2016Wooldridge, J. M. (2016). Introdução à econometria. Uma abordagem
moderna (P. R. D. S. Lopes & L. V. Koeppl, Trad.). (6a ed.). Cengage Learning.
(Trabalho original publicado em 2004).). Table
3 details all the variables used in this study.
This study contributes to the existing literature by adding to the analysis of the relationship between the companies’ cash position and their performance during a specific period of recession in Brazil and by evaluating the differences in the intensity of such relationships in the several sectors of the economy.
For comparison purposes and to verify the robustness of the methodology used, the following approaches were considered: models with control variables with a one-year gap and not standardized for the sector averages; models with no time lag in the control variables and not standardized for the sector averages; and models with a one-year lag in the control variables and standardized for the sector averages, including the period from 2009 to 2013, as a comparison of the impact of the cash position on the companies’ performance before the recession period. The findings were similar to the ones presented in this study and can be made available upon request to the authors.
Statistical model
To develop the proposed analysis, data were organized in a balanced dynamic panel (Wooldridge, 2004/2016Wooldridge, J. M. (2016). Introdução à econometria. Uma abordagem moderna (P. R. D. S. Lopes & L. V. Koeppl, Trad.). (6a ed.). Cengage Learning. (Trabalho original publicado em 2004).) for the period between 2013 and 2016. According to Wooldridge (2016)Wooldridge, J. M. (2016). Introdução à econometria. Uma abordagem moderna (P. R. D. S. Lopes & L. V. Koeppl, Trad.). (6a ed.). Cengage Learning. (Trabalho original publicado em 2004)., this methodology must be used when the goal is to capture in the model the lagged effects of the dependent variables. In this case, the dependent variables present a time persistency effect, meaning that the result of the previous year impacts the result of the current one since both ROA and market to book indicators reflect the results of a continuous effort generated by the companies over a structural asset base, workforce, clients, among others, which are in constant development. To test the hypotheses defined in this study, the following equations are proposed:
In equations (2) and (3), i represents the company, and t represents the year of the observation. xi, t–1contains the control variables mentioned and detailed in the previous sections. The term ai represents the non-observable effect of the company, and the 𝒷t represents the non-observable effect of the time, while ε is the term of the idiosyncratic error.
The Hausman test was applied to decide on the use of fixed effects or random effects in the models’ estimation. The Hausman test indicated that the model with random effects would be the most appropriate, suggesting the non-existence of correlation between the non-observed heterogeneous effects and the error term, allowing the exclusion of the non-observed heterogeneity using the first difference. To account for the heteroscedasticity of the errors in the models, standard errors robust to heteroscedasticity were used.
RESULTS
Table 4 details the evolution of the variables during the analyzed period. Regarding the ROA variable, one can observe the deterioration of this indicator over the years, with a slight deterioration in 2014 and, after that, a deepened deterioration of this indicator during 2015 and 2016, which were the harshest years of the recession, when a cumulative factor of the recession contributed to intensifying the negative impacts on the companies. Consistent with these findings, in this same period, it can be observed an increase in the variability of the results, measured by the standard deviation, indicating a higher variability in the companies’ operational performance.
Regarding the market to book variable, it is important to remind that it measures the market
value of the companies, calculated as the market value (shares’ price multiplied by number of
shares) over the book value of the company. Therefore, considering that during the recession
period the performance of the Brazilian stock market has been significantly impacted, the
average of the market to book indicator reduced during the analyzed period, indicating an
overall reduction in the market value of companies. In 2015, as a result of the combination of
the economic recession with the political uncertainties – that ultimately resulted in the
replacement of the Brazilian president –, the stock market was significantly affected by the
political and economic uncertainties, which was reflected in the sharp decrease in the average
of the market to book ratio and in the significant increase of the standard deviation in that
year. These oscillations observed in the companies’ performance indicators are consistent with
the expected results for a recession period (Adjei, 2013Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
).
Lack of growth, reduction in the investment level, increase in leverage, and decrease in the
revenues of the companies are also expected results due to the prolonged crisis. An increase in
leverage in periods of economic recession was also observed by Zeitun et al. (2017)Zeitun, R., Temimi, A., & Mimouni, K. (2017). Do financial crises alter the
dynamics of corporate capital structure? Evidence from GCC countries. The Quarterly
Review of Economics and Finance, 63, 21–33. https://doi.org/10.1016/j.qref.2016.05.004
https://doi.org/10.1016/j.qref.2016.05.0...
.
Table 5 presents the correlations between the variables used in the model. For the analysis of the full sample, the variables did not present a high level of correlation, and, thus, undesirable effects of multicollinearity are not expected in the model.
The analysis of the correlations points out that ROA has a significant correlation to all the variables, being negative to leverage and positive to the others. This indicates that companies with higher ROA retain a higher cash position, are bigger, have a larger amount of investments, lower leverage, and higher annual growth and pay dividends, which is consistent with the expected directions according to the existing literature. Companies with a higher market to book ratio present similar results, except for the growth variable, which presented a low correlation.
The lagged cash position has a positive and significant correlation to the investments and payout variables, meaning that companies with higher cash positions invest more and pay more dividends to their shareholders. It is important to note that since cash position measures the relative cash position of companies weighted by their size (total assets) and sector, the correlation comparison of with the size of the company is compromised.
Since this study also aims at evaluating the relationship between the cash position and the performance of companies according to their sector of activity, Table 6 was prepared to show the correlation between the dependent variables and the independent variable for each of the sectors.
The asterisk in the indicators of correlation means that the correlation between the dependent variables and the independent variable is significant at the 5% level. It can be noted as a positive and significant relationship for some of the sectors, which reinforces that the sector in which the company operates can impact the intensity of the relationship between cash position and performance. These results are aligned with the indication provided in Table 2 by showing a stronger relation in the health and other sectors and a less intense relation in the public utility and consumers sectors. It was not identified a statistically significant relationship for the industry and basic materials sectors.
Econometric analysis
Table 7 presents the results of the econometric analysis proposed for this study. In total, three regressions were performed for each of the dependent variables (ROA and market to book). All regressions were performed by using instrumental variables, aiming at factoring in the bias in the estimators caused by the dynamic panel model.
According to the results presented in Table 7, the null hypothesis of serial autocorrelation in the first-order errors (AR1) can be rejected, and there is no evidence of serial correlation in the second-order errors (AR2), being valid the conditions used by Arellano and Bond (1991)Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297.. All variables used as instruments presented statistically relevant correlations with the endogenous independent variable (lagged independent variable). Therefore, the validity of the instruments used in this study is confirmed.
Models 1 and 2 aim to test hypothesis 1. Regression 1 presents only the control variables, while model 2 adds the cash position variable. Model 3 tests hypothesis 2 by adding the interactions between cash position and performance for each of the sectors.
The first relevant observation is the strong explanatory power of the models. While the models that use ROA as the dependent variable present R² between 38 and 43%, the models that use market to book ratio present R² between 9 and 10%. Since the market to book indicator incorporates the impact of investors’ perception of the share price of companies, there are several other variables that affect the market to book indicator that are not captured by the variables set in this study, mainly in a period of economic recession, for instance: the economic development, country’s growth perspectives, political environment. Therefore, the models proposed in this study are more robust to test ROA as a dependent variable since this indicator only accounts for the data presented in the companies’ financial statements.
The results related to models 2 and 3, reported in Table 7, confirm H1, according to which the maintenance of cash position positively impacts performance, and H2, in which is stated that the sector in which the company operates impacts the relationship between cash position and performance when the ROA variable is tested. These results were not confirmed for the market to book variable.
For the ROA performance indicator, the independent variable presented statistical significance, confirming the positive and significant
relationship between the companies’ cash position and performance, which corroborates
hypothesis 1. The estimations of the coefficient must be interpreted in terms of deviations
from the sector average. Thus, the 0.0057 result for model 2 means that for each standard
deviation of cash / total assets of the company on top of the sector average,
it is expected an increase of 0.57% in the ROA. Although the size and investments control
variables do not present statistical significance - which was expected based on the studies
conducted by Forti et al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
and Fresard (2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
-, the control variables lagged ROA, leverage,
Δ growth, and payout presented the expected signs and statistical significance. The
confirmation of the significant and positive relationship between the companies’ cash position
and operational performance, measured by ROA, is consistent with the results identified by
Adjei (2013)Adjei, F. (2013). The effects of cash holdings on corporate performance during a
credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and
Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
https://doi.org/10.1007/s12197-011-9177-...
, Forti et
al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
, Chang et al. (2017)Chang, Y., Benson, K., & Faff, R. (2017). Are excess cash holdings more
valuable to firms in times of crisis? Financial constraints and governance matters.
Pacific-Basin Finance Journal, 45, 157–173. https://doi.org/10.1016/j.pacfin.2016.05.007
https://doi.org/10.1016/j.pacfin.2016.05...
, Chen et al. (2018)Chen, H.-C., Chou, R. K., & Lu, C.-L. (2018). Saving for a rainy day:
Evidence from the 2000 dot-com crash and the 2008 credit crisis. Journal of Corporate
Finance, 48, 680–699. https://doi.org/10.1016/j.jcorpfin.2017.12.025
https://doi.org/10.1016/j.jcorpfin.2017....
, Fresard
(2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, Pamplona, Silva, and Nakamura (2019)Pamplona, E., Silva, T. P. da, & Nakamura, W. T. (2019). Influência da folga
financeira no desempenho econômico de empresas industriais brasileiras e mexicanas.
Estudios Gerenciales, 35(153), 399–415. https://doi.org/10.18046/j.estger.2019.153.3366
https://doi.org/10.18046/j.estger.2019.1...
,
and Pamplona, Silva, Nakamura, and Rodrigues Junior
(2019)Pamplona, E., Silva, T. P. da, Nakamura, W. T. , & Rodrigues Junior, M. M.
(2019). Influência da folga financeira no desempenho econômico de empresas familiares e não
familiares brasileiras. Contabilidade Vista & Revista, 30(1), 43–67.
https://revistas.face.ufmg.br/index.php/contabilidadevistaerevista/article/view/4590
https://revistas.face.ufmg.br/index.php/...
.
When hypothesis 1 was tested using the market to book dependent variable, although the independent variable presented the expected sign, it was not observed statistical significance in the relationship between cash position and the performance of the companies. In this case, only market to book, leverage, and VarIbov (variation of the São Paulo Stock Exchange index) lagged control variables presented statistical significance and confirmed the expected signs. Variables such as size and Δ growth did not present statistical significance.
Therefore, the results presented in this study confirm H1 - companies that maintain higher
cash positions have better operational performance when performance is measured by ROA. The
fact that H1 is not confirmed for the market to book variable contradicts the results obtained
by Deb et al. (2017)Deb, P., David, P., & O’Brien, J. P. (2017). When is cash good or bad for
firm performance? Strategic Management Journal, 38(2), 436–454. https://doi.org/10.1002/smj.2486
https://doi.org/10.1002/smj.2486...
, Forti et al. (2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
, Fresard (2010)Fresard, L. (2010). Financial strength and product market behavior: The real
effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122.
https://doi.org/10.1111/j.1540-6261.2010.01562.x
https://doi.org/10.1111/j.1540-6261.2010...
, Kim and Bettis (2013)Kim, C., & Bettis, R. A. (2013). Cash is surprisingly valuable as a
strategic asset. Strategic Management Journal, 35(13), 2053–2063. https://doi.org/10.1002/smj.2205
https://doi.org/10.1002/smj.2205...
, and O’Brien and Folta (2009)O’Brien, J. P., & Folta, T. B. (2009). A transaction cost perspective on
why, how and when cash impacts firm performance. Managerial and Decision Economics,
30(7), 465–479. https://doi.org/10.1002/mde.1457
https://doi.org/10.1002/mde.1457...
. A possible explanation for this divergence is that the
mentioned authors used data from companies based in developed countries with mature and
healthier markets and business environments. In Brazil, the opportunity cost of maintaining a
cash position (discount rate used in valuation models, the weighted average cost of capital) is
higher than in developed countries and markets, and, perhaps, for this reason, the benefits of
a better operational performance in periods of economic recession do not justify the additional
investment needed in cash. Still, the market to book indicator incorporates the market
expectations related to the results and future growth of the company, and, in periods of
economic recession, the investors’ perception of potential for future growth is possibly
harmed. Therefore, we believe that, in periods of economic recessions, ROA better reflects
companies’ operational performance.
In model 3, with the use of ROA, variable presented significant and positive interaction for the health and public
utilities sectors. This confirms H2, according to which there are differences in the intensity
of the relationship between cash position and performance of the companies for the sectors
considered in the study. However, although the indicators of the relationship between cash
position and the company’s performance present differences for each of the sectors, statistical
significance was not observed for the market to book dependent variable. These results
partially confirm the findings obtained by Forti et al.
(2011)Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa,
desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de
Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
https://doi.org/10.11606/rco.v5i13.34802...
since those authors found a positive and statistically significant relationship
between cash position and ROA indicators for several sectors.
CONCLUSIONS
This study had the objective of analyzing if, during the most recent economic recession that Brazil went through, the cash position of companies had an impact on their operational performance. For that, performance was measured by two different dependent variables, ROA and market to book ratio, in the period between 2013 and 2016, using data regression in a balanced and dynamic panel. We contributed to the existing literature by evaluating the effect of the maintenance of cash position on the performance of Brazilian companies during recession periods. Also, we contributed to the discussion related to the intensity of this effect based on the sector in which the company operates. Several control variables were used according to the existing literature in order to isolate the specific effects of cash position on the companies’ performance.
This study contributed to the literature related to the cash position of companies by confirming that cash position can be used by companies as a financial management tool, with the aim of softening the impacts of potential market downturns, supporting the management of company liquidity and contributing to better operational results.
The results obtained in this study indicate that there is a positive and statistically relevant relationship between cash position and companies’ performance when performance is measured by ROA. This indicates that, in periods of economic recession, although, on average, all companies observe deterioration in operational performance, as shown in the descriptive analysis in Table 4, companies that have a higher cash position than their competitors have better operational performance (ROA). More specifically, for each standard deviation of cash / total assets of the company above the sector average, it is expected an increase of 0.57% in the ROA. This result may be associated, for instance, with a higher capacity of the company to manage its working capital needs, proceed with planned investments or pursue business opportunities during periods of recession. In addition, it was confirmed that the intensity of this relationship between cash position and performance varies depending on the sector in which the company operates. Regarding the health and public utilities sectors, for each point of variation in the z_cashtt-1 indicator, the ROA of the companies increases more than the ROA of companies in the reference sector (industry).
It was not found a statistically relevant relationship between cash position and performance when measured by the market to book dependent variable. We believe that as the opportunity cost of maintaining cash position (discount rate used in valuation models, the weighted average cost of capital) is higher than that in developed countries and markets and, perhaps, for this reason, the benefits of a better operational performance in periods of economic recession do not justify the additional investment needed in cash. The uncertainty related to the recession period impacts the market value of the shares, sometimes not in a rational manner, adding to the market to book indicator a series of impacts, making it difficult to capture in the models by the control variables.
Future studies may add macroeconomic factors in the modeling, such as gross domestic product
(GDP) growth, unemployment rates, consumer confidence indexes, among others, with the objective
of better capturing the variables that can impact the market to book indicator. Also, other
alternative variables to the market to book ratio could be considered, such as ROE, net margin,
sales growth, Tobin’s Q, dividend yield, and share buyback (Bhagat & Bolton, 2008Bhagat, S., & Bolton, B. (2008). Corporate governance and firm performance.
Journal of Corporate Finance, 14(3), 257–273. https://doi.org/10.1016/j.jcorpfin.2008.03.006
https://doi.org/10.1016/j.jcorpfin.2008....
). The fact that the study focused only on one period of
recession is a limitation of this work. Future studies may consider longer periods of other
recessions, analyzing the long-term maintenance of cash position. With a larger database, it
would be possible to verify if the impact of this variable on performance is different in
periods of economic recession and expansion. It would also be interesting to verify the impact
on the performance due to capital structure characteristics, considering the sector differences
in terms of leverage and financial slack (Campos & Nakamura,
2015Campos, A. L. S., & Nakamura, W. T. (2015). Rebalanceamento da estrutura de
capital: Endividamento setorial e folga financeira. Revista de Administração
Contemporânea, 19, 20–37. https://doi.org/10.1590/1982-7849rac20151789
https://doi.org/10.1590/1982-7849rac2015...
). Although only five companies were excluded from the database due to bankruptcy,
since we opted for a balanced panel, the survival bias is also a limitation of this study.
REFERENCES
- Adjei, F. (2013). The effects of cash holdings on corporate performance during a credit crunch: Evidence from the sub-prime mortgage crisis. Journal of Economics and Finance, 37, 188–199. https://doi.org/10.1007/s12197-011-9177-8
» https://doi.org/10.1007/s12197-011-9177-8 - Almeida, H., Campello, M., Cunha, I., & Weisbach, M. S. (2014). Corporate liquidity management: A conceptual framework and survey. The Annual Review of Financial Economics, 6, 135–162. https://doi.org/10.1146/annurev-financial-110613-034502
» https://doi.org/10.1146/annurev-financial-110613-034502 - Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297.
- Banco Central do Brasil (2017). http://www.bcb.gov.br/htms/estabilidade/2016_04/refOrg.pdf
» http://www.bcb.gov.br/htms/estabilidade/2016_04/refOrg.pdf - Bhagat, S., & Bolton, B. (2008). Corporate governance and firm performance. Journal of Corporate Finance, 14(3), 257–273. https://doi.org/10.1016/j.jcorpfin.2008.03.006
» https://doi.org/10.1016/j.jcorpfin.2008.03.006 - Campos, A. L. S., & Nakamura, W. T. (2015). Rebalanceamento da estrutura de capital: Endividamento setorial e folga financeira. Revista de Administração Contemporânea, 19, 20–37. https://doi.org/10.1590/1982-7849rac20151789
» https://doi.org/10.1590/1982-7849rac20151789 - Carracedo, A. (2010). Determinantes da reserva de caixa das empresas brasileiras [Dissertação de mestrado não publicada]. Fundação Getulio Vargas. http://hdl.handle.net/10438/8241
» http://hdl.handle.net/10438/8241 - Chang, Y., Benson, K., & Faff, R. (2017). Are excess cash holdings more valuable to firms in times of crisis? Financial constraints and governance matters. Pacific-Basin Finance Journal, 45, 157–173. https://doi.org/10.1016/j.pacfin.2016.05.007
» https://doi.org/10.1016/j.pacfin.2016.05.007 - Chen, H.-C., Chou, R. K., & Lu, C.-L. (2018). Saving for a rainy day: Evidence from the 2000 dot-com crash and the 2008 credit crisis. Journal of Corporate Finance, 48, 680–699. https://doi.org/10.1016/j.jcorpfin.2017.12.025
» https://doi.org/10.1016/j.jcorpfin.2017.12.025 - Chen, N., & Mahajan, A. (2010). Effects of macroeconomic conditions on corporate liquidity – international evidence. International Research Journal of Finance and Economics, 35, 112–129. https://www.efmaefm.org/0efmameetings/EFMA%20ANNUAL%20MEETINGS/2008-Athens/papers/Mahajan.pdf
» https://www.efmaefm.org/0efmameetings/EFMA%20ANNUAL%20MEETINGS/2008-Athens/papers/Mahajan.pdf - Deb, P., David, P., & O’Brien, J. P. (2017). When is cash good or bad for firm performance? Strategic Management Journal, 38(2), 436–454. https://doi.org/10.1002/smj.2486
» https://doi.org/10.1002/smj.2486 - Dutra, V. R., Sonza, I. B, Ceretta, P. S., & Galli, O. C. (2018). Determinants of cash retention in Brazilian companies: An analysis after the 2008 crisis. Journal of Education and Research in Accounting, 12(3), 349–363. https://doi.org/10.17524/repec.v12i3.1808
» https://doi.org/10.17524/repec.v12i3.1808 - Faulkender, M., & Wang, R. (2006). Corporate financial policy and the value of cash. The Journal of Finance, 61(4), 1957–1990. https://doi.org/10.1111/j.1540-6261.2006.00894.x
» https://doi.org/10.1111/j.1540-6261.2006.00894.x - Ferreira, M. A., & Vilela, A. S. (2004). Why do firms hold cash? Evidence from EMU countries. European Financial Management, 10(2), 295–319. https://doi.org/10.1111/j.1354-7798.2004.00251.x
» https://doi.org/10.1111/j.1354-7798.2004.00251.x - Forti, C. A. B., Peixoto, F. M., & Freitas, K. S. (2011). Retenção de caixa, desempenho operacional e valor: Um estudo no mercado de capitais brasileiro. Revista de Contabilidade e Organizações, 5(13), 20–33. https://doi.org/10.11606/rco.v5i13.34802
» https://doi.org/10.11606/rco.v5i13.34802 - Fresard, L. (2010). Financial strength and product market behavior: The real effects of corporate cash holdings. The Journal of Finance, 65(3), 1097–1122. https://doi.org/10.1111/j.1540-6261.2010.01562.x
» https://doi.org/10.1111/j.1540-6261.2010.01562.x - Fundação Getulio Vargas (2021). Comunicado de Datação de Ciclos Mensais. https://portalibre.fgv.br/node/1776
» https://portalibre.fgv.br/node/1776 - George, G. (2005). Slack resources and the performance of privately held firms. Academy of Management Journal, 48(4), 661–676. https://doi.org/10.5465/amj.2005.17843944
» https://doi.org/10.5465/amj.2005.17843944 - Han, S., & Qiu, J. (2007). Corporate precautionary cash holdings. Journal of Corporate Finance, 13(1), 43–57. https://doi.org/10.1016/j.jcorpfin.2006.05.002
» https://doi.org/10.1016/j.jcorpfin.2006.05.002 - Harford, J., Klasa, S., & Maxwell, W. F. (2013). Refinancing risk and cash holdings. The Journal of Finance, 69(3), 975–1012. https://doi.org/10.1111/jofi.12133
» https://doi.org/10.1111/jofi.12133 - Harford, J., Mansi, S. A., & Maxwell, W. F. (2008). Corporate governance and firm cash holdings in the US. Journal of Financial Economics, 87(3), 535–555. https://doi.org/10.1016/j.jfineco.2007.04.002
» https://doi.org/10.1016/j.jfineco.2007.04.002 - Iquiapaza, R. A., & Amaral, H. F. (2008). Restrições de financiamento e política de gestão de caixa nas empresas listadas da Bovespa. Revista de Informação Contábil, 2(3), 77–89. https://doi.org/10.34629/ric.v2i3.77-89
» https://doi.org/10.34629/ric.v2i3.77-89 - Ivashina, V. , & Scharfstein, D. (2010). Bank lending during the financial crisis of 2008. Journal of Financial Economics, 97(3), 319–338. https://doi.org/10.1016/j.jfineco.2009.12.001
» https://doi.org/10.1016/j.jfineco.2009.12.001 - Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, 76(2), 323–329. https://www.jstor.org/stable/1818789
» https://www.jstor.org/stable/1818789 - Jensen, M. C. (1987). The free cash flow theory of takeovers: A financial perspective on mergers and acquisitions and the economy. “The Merger Boom”, Proceedings of a Conference Sponsored by Federal Reserve Bank of Boston 102–143. http://dx.doi.org/10.2139/ssrn.350422
» http://dx.doi.org/10.2139/ssrn.350422 - Keynes, J. M. (1936). The general theory of employment, interest, and money McMillan.
- Kim, C., & Bettis, R. A. (2013). Cash is surprisingly valuable as a strategic asset. Strategic Management Journal, 35(13), 2053–2063. https://doi.org/10.1002/smj.2205
» https://doi.org/10.1002/smj.2205 - Lemmon, M. L., Roberts, M. R., & Zender, J. F. (2008). Back to the beginning: Persistence and the cross-section of corporate capital structure. The Journal of Finance, 63(4), 1575–1608. https://doi.org/10.1111/j.1540-6261.2008.01369.x
» https://doi.org/10.1111/j.1540-6261.2008.01369.x - MacKay, P. , & Phillips, G. M. (2005). How does industry affect firm financial structure? The Review of Financial Studies, 18(4), 1433–1466. https://doi.org/10.1093/rfs/hhi032
» https://doi.org/10.1093/rfs/hhi032 - Maksimovic, V., Stomper, A., & Zechner, J. (1999). Capital structure, information acquisition and investment decisions in an industry framework. Review of Finance, 2(3), 251–271. https://doi.org/10.1023/A:1009825432146
» https://doi.org/10.1023/A:1009825432146 - Manoel, A. A. S., Moraes, M. B. D. C., Santos, D. F. L., & Neves, M. F. (2017). Determinants of corporate cash holdings in times of crisis: Insights from Brazilian sugarcane industry private firms. International Food and Agribusiness Management Review, 21(2), 201–218. http://dx.doi.org/10.22434/IFAMR2017.0062
» http://dx.doi.org/10.22434/IFAMR2017.0062 - Mikkelson, W. H., & Partch, M. M. (2003). Do persistently large cash reserves hinder performance? Journal of Financial and Quantitative Analysis, 38(2), 275–294. https://doi.org/10.2307/4126751
» https://doi.org/10.2307/4126751 - Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 574–592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x
» https://doi.org/10.1111/j.1540-6261.1984.tb03646.x - Nason, R. S., & Patel, P. C. (2016). Is cash king? Market performance and cash during a recession. Journal of Business Research, 69(10), 4242–4248. https://doi.org/10.1016/j.jbusres.2016.03.001
» https://doi.org/10.1016/j.jbusres.2016.03.001 - O’Brien, J. P., & Folta, T. B. (2009). A transaction cost perspective on why, how and when cash impacts firm performance. Managerial and Decision Economics, 30(7), 465–479. https://doi.org/10.1002/mde.1457
» https://doi.org/10.1002/mde.1457 - Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. The Journal of Financial Economics, 52(1), 3–46. https://doi.org/10.1016/S0304-405X(99)00003-3
» https://doi.org/10.1016/S0304-405X(99)00003-3 - Ozkan, A., & Ozkan, N. (2004). Corporate cash holdings: An empirical investigation of UK companies. Journal of Banking and Finance, 28(9), 2103–2134. https://doi.org/10.1016/j.jbankfin.2003.08.003
» https://doi.org/10.1016/j.jbankfin.2003.08.003 - Pamplona, E., Silva, T. P. da, & Nakamura, W. T. (2019). Influência da folga financeira no desempenho econômico de empresas industriais brasileiras e mexicanas. Estudios Gerenciales, 35(153), 399–415. https://doi.org/10.18046/j.estger.2019.153.3366
» https://doi.org/10.18046/j.estger.2019.153.3366 - Pamplona, E., Silva, T. P. da, Nakamura, W. T. , & Rodrigues Junior, M. M. (2019). Influência da folga financeira no desempenho econômico de empresas familiares e não familiares brasileiras. Contabilidade Vista & Revista, 30(1), 43–67. https://revistas.face.ufmg.br/index.php/contabilidadevistaerevista/article/view/4590
» https://revistas.face.ufmg.br/index.php/contabilidadevistaerevista/article/view/4590 - Ranajee, R., & Pathak, R. (2019). Corporate cash holding during crisis and beyond: What matters the most. International Journal of Managerial Finance, 15(4), 492–510. https://doi.org/10.1108/IJMF-03-2018-0085
» https://doi.org/10.1108/IJMF-03-2018-0085 - Rocca, C. A. (2018). Financiamento do investimento no Brasil e o papel do mercado de capitais Iedi. https://web.bndes.gov.br/bib/jspui/handle/1408/15840
» https://web.bndes.gov.br/bib/jspui/handle/1408/15840 - Sicsu, J. (2019). Brasil: É uma depressão, não foi apenas uma recessão. Revista de Economia Contemporânea, 23, 1–41. https://doi.org/10.1590/198055272312
» https://doi.org/10.1590/198055272312 - Simutin, M. (2010). Excess cash and stock returns. Financial Management, 39(3), 1197–1222. https://doi.org/10.1111/j.1755-053X.2010.01109.x
» https://doi.org/10.1111/j.1755-053X.2010.01109.x - Talberg, M., Winge, C., Frydenberg, S., & Westgaard, S. (2008). Capital structure across industries. International Journal of the Economics of Business, 15(2), 181–200. https://doi.org/10.1080/13571510802134304
» https://doi.org/10.1080/13571510802134304 - Wooldridge, J. M. (2016). Introdução à econometria. Uma abordagem moderna (P. R. D. S. Lopes & L. V. Koeppl, Trad.). (6a ed.). Cengage Learning. (Trabalho original publicado em 2004).
- Zarowny, C. A. (2016). Impacto da gestão de capital de giro na lucratividade das firmas brasileiras em diferentes ciclos econômicos [Dissertação de mestrado não publicada]. Insper. https://repositorio.insper.edu.br/bitstream/11224/1719/3/Cynthia%20Azevedo%20Zarowny_Trabalho.pdf
» https://repositorio.insper.edu.br/bitstream/11224/1719/3/Cynthia%20Azevedo%20Zarowny_Trabalho.pdf - Zeitun, R., Temimi, A., & Mimouni, K. (2017). Do financial crises alter the dynamics of corporate capital structure? Evidence from GCC countries. The Quarterly Review of Economics and Finance, 63, 21–33. https://doi.org/10.1016/j.qref.2016.05.004
» https://doi.org/10.1016/j.qref.2016.05.004
Publication Dates
-
Publication in this collection
12 May 2023 -
Date of issue
2023
History
-
Received
13 Mar 2020 -
Accepted
23 Mar 2022