Determinants of corporate cash holdings in South Africa

Arbeitspapier

Globally, corporate cash holdings have risen since the 1980s. In South Africa, some commentators have accused corporations of engaging in an 'investment strike', while others see corporate liquidity as a precaution against systemic uncertainty. We use the unique South African Revenue Service/National Treasury firm-level dataset to scrutinize corporate liquidity, using panel analysis. Relative to GDP, corporate cash and liquidity holdings have not increased between 2010 and 2017. However, corporate cash is high in international comparison and has grown at the firm level. We do not find evidence for the hypothesis that companies are engaging in an investment strike. Cash and liquidity are shaped by idiosyncratic and sectoral risk factors. In the short run, heightened uncertainty might reduce corporate cash and liquidity as firms struggle to adjust to an unexpected economic situation. In the medium run, we find a strong association between political uncertainty and corporate cash and liquidity holdings.

Object Details

• ISBN: 978-92-9267-216-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Working Paper ; No. 2022/85

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Firm Behavior: Empirical Analysis
• Subject: South Africa ; corporate liquidity ; cash holdings ; panel analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Karwowski, Ewa ; Szymborska, Hanna ; Lesame, Keagile ; Thoka, Tlhologelo
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2022

Further information

• DOI: doi:10.35188/UNU-WIDER/2022/216-4
• Handle: http://hdl.handle.net/10419/267834
• Last update: 10.03.2025, 11:41 AM CET