EFFECT OF FIRM-SPECIFIC AND MACROECONOMIC CONDITIONS ON CORPORATE CASH HOLDINGS: EVIDENCE FROM FMCG COMPANIES IN INDIA

This paper attempts to find out the effects of firm-specific and macroeconomic variables on the corporate cash holdings. For this, the panel data regression analysis is applied on the selected FMCG companies in India for the years 2001-02 to 2016-17. The analysis showed that FMCG firms in India prefer keeping huge amount of cash reserves and one of the preferred sources of cash holdings is the cash flow. However, large scale and highly levered firms do not have large cash holdings. On the other hand, among the macroeconomic variables economic growth and bank lending rate plays a significant role while taking cash holdings decisions. The paper has tried to fill the gap of previous literatures that often ignore the role of macroeconomic element in cash holdings decisions.