Assessment of Cash Flow Sensitivity of Cash Holdings

The objective of this study is to evaluate changes in the level of cash holdings in response to corporates’ cash flows. For this، using financial information of a sample consisting of 118 companies listed in the Tehran Stock Exchange in the period 2006-2011، the sensitivity of cash flows of cash holdings was studied، regarding three aspects of: cash flows types (positive or negative)، financial constraints، and external monitoring. This study is an applied research and takes regression method of panel data to test hypotheses. The findings showed that there was no difference in the cash flow sensitivity of cash in the two cases that companies face with a positive or a negative cash flows. Also، there was no difference between the cash flow sensitivity of cash in the cases of financially constrained and financially unconstrained. Additionally the findings showed that for the companies with stronger external monitoring the cash flow sensitivity of cash was not greater than that for the other companies.