Do Factors Affecting Firms' Cash Holdings Differ Across Sectors?: Evidence from Türkiye

Abstract

This paper explores whether the factors influencing firms' cash holdings vary across different sectors, such as (i) basic materials, (ii) consumer cyclicals, (iii) consumer non-cyclicals, (iv) energy, (v) healthcare, (vi) industrials, (vii) real estate, (viii) technology, and (ix) utilities. Firm-level factors encompass market-to-book ratio, size, cash flow, net working capital, capital expenditures, leverage, cash flow volatility, R&D expenses, and dividend payment. External factors include periods of economic uncertainty, that is, times of financial crisis. The paper's dataset includes 385 firms listed on Borsa Istanbul, T & uuml;rkiye and 4,375 firm-year observations from 2001 to 2022. Data analysis is conducted using the Driscoll-Kraay robust standard errors panel data estimation method, which ensures unbiased and consistent results despite heteroscedasticity, autocorrelation, and crosssectional dependence.The findings indicate that variables such as cash flow, net working capital, capital expenditures, leverage, R&D expenses, and dividends are key determinants shaping cash holding behavior in firms within T & uuml;rkiye as a developing country, regardless of the sector in which these firms operate. In times of economic uncertainty, firms tend to increase their cash reserves. Moreover, the impact of the firm size and market-to-book ratio on cash holding levels varies across different sectors. In conclusion, although some factors have a consistent impact across various sectors, sector-level analyses reveal unique characteristics and dynamics within each sector that shape the factors influencing firms'cash management strategies.