An Empirical Review on Corporate Cash Holding: Motivation, Influencing Factor and Consequence

With the increasing economic uncertainty over the last few years, corporate cash holdings have become a popular research topic, consequently generating extensive academic literature. This work conducts a comprehensive review of the existing literature concerning corporate cash holdings, delving into the motivations behind companies maintaining cash reserves, the factors influencing changes in their cash holdings, and the impact of such holdings on corporate entities. This article reviews and synthesizes the literature into the key perspectives on the importance of cash holdings, delineating three principal perspectives: transaction motivation, precaution motivation, and agency motivation. In addition, the research focuses on the factors for changes in corporate holdings, discovering factors including the company's financial situation, governance structure, macro policies, leverage, and industry characteristics. Finally, this paper explores the effect of cash holdings on corporations, providing an understanding of market performance, such as market value and risk-taken ability. This work shows that scholarly examinations of corporate cash holdings have methodologically advanced, encompassing diverse determinants and employing sophisticated empirical techniques, reflecting a shift towards addressing timely and globally relevant concerns.