The relationship between idiosyncratic risk and cash holding of companies listed on the Tehran Stock Exchange

The main purpose of this study is to investigate the relationship between idiosyncratic risk and cash holding of companies listed on the Tehran Stock Exchange. A total of 143 companies (1144 firm - year) have been studied during eight-year period of 2012-2019. The company's idiosyncratic risk is an important source of agency costs. Idiosyncratic risk is expected to indicate low management risk. Therefore, agency costs affect the discretionary idiosyncratic risk of the company's cash holding and allocating cash. Companies with discretionary idiosyncratic risk have more cash, and companies with high discretionary idiosyncratic risk have less cash reserves. The findings of the present study show that in general, there is a positive and significant relationship between special risk and cash holding.