Impact of financial constraints and financial distress on cash holdings

Variable	Formula	Expected sign of impact on cash holdings
DV
Cash ratio	Cash and cash equivalents To total assets minus cash and cash equivalents (%)	NA
IV
KZ index	Kaplan–Zingales index of financial constraints	“ + ”
Z-score	Altman Z-score of financial distress	“-” for normal time “+” for crisis time
Crisis	1 for crisis time (2009, 2020), 0 otherwise	“ + ”
CVs
Size	Natural logarithm of total assets	“-”
Profitability	Operating profit to total assets (%)	“ + ”
Debt ratio	Total liabilities to total assets (%)	“-”
Asset turnover	Sales revenue to total assets (%)	“ + ”

1 Source: author’s own elaboration.

1 CVs, control variables; DV, dependent variable; IV, independent variables.

Table 2

Descriptive statistics of the variables included in the research

Variables	Mean	Median	Min	Max	SD
Cash ratio	9.4	5.9	0.2	45.1	10.3
KZ index	220.8	4.0	−120.2	6,615.9	1,043.7
Z-score	7.5	7.0	−4.8	20.6	4.4
Profitability	1.8	3.7	−5.0	31.5	14.7
Debt ratio	50.5	49.4	8.9	119.8	23.2
Asset turnover	103.3	91.4	8.4	340.5	76.6

1 Source: author’s own calculations.

1 SD, standard deviation.

Table 3

Descriptive statistics of variables (mean and median) in normal and crisis times

	Normal times	Crisis times	U Mann–Whitney test
Cash ratio	9.3	10.5	−3.227***
	5.7	7.1
KZ index	213.2	268.5	−1.645*
	3.9	4.4
Z-score	7.5	7.2	−0.849
	7.0	7.0
Profitability	1.8	1.4	−1.672*
	3.7	3.4
Debt ratio	50.3	51.9	−0.939
	49.2	50.2
Asset turnover	104.0	99.1	−1.154
	91.8	88.9

1 * p < 0.1

1 ** p < 0.01

1 *** p < 0.001.

1 Source: author’s own calculations.

Table 4

Regression analysis results with the cash ratio as the DV and KZ index as the independent variable

	Whole period	Whole period	Whole period	Crisis time	Crisis time	Normal time	Normal time
	1	2	3	4	5	6	7
KZ index	−0.072*** (1.000)	−0.090*** (1.009)	−0.032* (1.096)	−0.046 (1.000)	−0.003 (1.128)	−0.078*** (1.000)	−0.037* (1.085)
Crisis	X	0.044** (1.000)	0.050** (1.002)	X	x	x	X
Size	X	X	−0.168*** (1.118)	X	−0.126** (1.091)		−0.175*** (1.123)
Profitability	X	X	0.083*** (1.350)	X	0.050 (1.459)		0.088*** (1.338)
Debt ratio	X	X	−0.184*** (1.228)	X	−0.148** (1.404)		−0.191*** (1.274)
Asset turnover	X	X	0.072*** (1.206)	X	0.085* (1.235)		0.070*** (1.203)
R square	0.005	0.042	0.094	0.002	0.057	0.006	0.101
F statistics	22.975***	65.684***	76.763***	1.283	7.234***	23.257***	85.226***

1 * p < 0.1,

1 ** p < 0.01,

1 *** p < 0.001; VIF is presented within parentheses.

1 Source: author’s own calculations.

1 DV, dependent variable; VIF, variance inflation factor.

Table 5

Regression analysis results with cash ratio as DV and Z-score as independent variable

	Whole period	Whole period	Whole period	Crisis time	Crisis time	Normal time	Normal time
	8	9	10	11	12	13	14
Z-score	0.373*** (1.000)	0.372*** (1.019)	0.389*** (1.454)	0.338*** (1.000)	0.397*** (1.537)	0.381*** (1.000)	0.388*** (1.447)
Crisis	X	0.050*** (1.001)	0.053*** (1.001)	X	X	x	X
Size	X	X	−0.114*** (1.125)	X	−0.093* (1.061)		−0.118*** (1.137)
Profitability	X	X	−0.055** (1.582)	X	−0.121* (1.712)		−0.044* (1.567)
Debt ratio	X	X	X	X	X	X	X
Asset turnover	X	X	0.102*** (1.141)	X	0.110** (1.140)		0.101*** (1.142)
R square	0.139	0.142	0.168	0.114	0.143	0.145	0.173
F statistics	713.217***	243.569***	179.212***	77.705***	24.926***	645.321***	198.399***

1 * p < 0.1,

1 ** p < 0.01,

1 *** p < 0.001; VIF is presented within parentheses.

1 Source: author’s own calculations.

1 DV, dependent variable; VIF, variance inflation factor.

Table 6

Regression analysis results with LnCash as DV and KZ index/Z-score as independent variable

	Whole period		Whole period
KZ index	0.003	Z-score	0.024***
Crisis	0.025**	Crisis	0.025**
Size	0.817***	Size	0.819***
Profitability	0.041***	Profitability	0.041***
Debt ratio	−0.013	Debt ratio	X
Asset turnover	0.055***	Asset turnover	0.056***
R square	0.669	R square	0.669
F statistics	1,479.041***	F statistics	1,778.564***

1 * p < 0.1,

1 ** p < 0.01,

1 *** p < 0.001.

1 Source: author’s own calculations.

1 DV, dependent variable.

References

Authors

Metrics

Articles in this issue

DOI: https://doi.org/10.2478/ijme-2022-0032 | Journal eISSN: 2543-5361 (formerly 2299-9701) | Journal ISSN: 2299-9701

Journal RSS Feed

Language: English

Page range: 13 - 31

Submitted on: Apr 5, 2022

Accepted on: Dec 14, 2022

Published on: Mar 31, 2023

Published by: SGH Warsaw School of Economics

In partnership with: Paradigm Publishing Services

Publication frequency: 4 issues per year

Keywords:

cash holdings,

COVID-19 crisis,

financial constraints,

financial distress,

global financial crisis

JEL:

D25,

G32,

G33

Related subjects:

Business and economics,

Business management,

Management accounting, financial controlling, cost calculation, investment

© 2023 Elżbieta Bukalska, Anna Maziarczyk, published by SGH Warsaw School of Economics
This work is licensed under the Creative Commons Attribution 4.0 License.

Volume 59 (2023): Issue 1 (March 2023)