Oil Price Volatility and Corporate Cash Holding Policy: An Empirical Research on BIST

Abstract

This paper has investigated whether the fluctuations in oil prices influence the cash holding levels of 349 non-financial firms in BIST between 1995 and 2021, and whether this effect affects the cash adjustment speeds of firms in high and low volatility periods. As a result of the analyses, it was found that as the oil price volatility increases, the cash holding levels of firms increase and this positive relationship is stronger for companies in the petrochemical sector. In addition, fluctuations in oil prices increase the adjustment speeds of firms to adapt to their optimal cash holding targets. As a result, when companies face uncertainty, they tend to hold more cash for prudence and hedging from possible risks.