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Article
Publication date: 14 November 2024

Fatima Saleh Abd Almajeed Al-Hamshary, Akmalia Mohamad Ariff, Khairul Anuar Kamarudin and Norakma Abd Majid

This study aims to investigate the association between corporate risk-taking and cash holdings, and whether financial constraints moderate this association.

Abstract

Purpose

This study aims to investigate the association between corporate risk-taking and cash holdings, and whether financial constraints moderate this association.

Design/methodology/approach

Regression analyses were applied to 606 firm-year observations from Saudi Arabia from 2011 to 2020.

Findings

Firms with higher risk-taking exhibit higher cash holdings, whereas financially constrained firms have lower cash holdings. The positive association between corporate risk-taking and cash holdings is weaker for financially constrained firms than for nonconstrained firms.

Practical implications

For investors, investment decisions that include the cash holding assessment would also consider the firm-level uncertainty surrounding the firms.

Originality/value

This study explores the joint effect of corporate risk-taking and financial constraints on cash holding, and hence considers the strategic adaptations to navigate uncertainty in strategies related to cash holdings in Saudi Arabia.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 18 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

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