Accruals Quality and Corporate Cash Holdings

• Main Authors: Hossein Fakhari, Seyed Rohallah Taghavi
• Format: Article
• Language: fas
• Published: University of Tehran 2009-09-01
• Series: بررسی‌های حسابداری و حسابرسی
• Subjects: Accruals quality; Corporate cash holdings; Financial Reporting Quality; Information asymmetry
• Online Access: https://acctgrev.ut.ac.ir/article_20400_788741d4c2794095f9fe824a4389d635.pdf

The consequences of good earnings quality to mitigate information asymmetry have been the subject of many empirical studies. However, evidence on implications of earnings quality on cash holdings is sparse. This Paper investigates the determinants of corporate cash holdings using panel data for firms listed in Tehran stock exchange from 2001 to 2007 to analyze the effect of financial reporting quality on cash holdings and uses accrual quality as a proxy of financial reporting quality. Our results suggest that cash holdings are negatively affected by financial reporting quality. This finding suggests firms with good accrual quality hold lower cash levels than firms with poor accrual quality. The results also show that cash holdings are positively affected by the growth opportunity, cash flows and liquid assets and negatively affected by size, debt maturity and opportunity cost.