Abstract
The paper presents empirical evidences of macroeconomic determinants of cash holdings using panel data of 65 non-financial firms listed in ASE during the period from 2000 to 2011. The results of this study find a partial significant relationship between explanatory macroeconomic variables and corporate cash holdings. The corporate cash holdings related positively with gross domestic production (GDP), and credit spread (CS) as well as government budget deficit and cash (BD).While Inflation (INF) and cash surplus/deficit (SURP) do not determine cash holdings of the firms. This paper extends the existing liquidity literature around the world by using the Fully Modified Ordinary Least Square (FMOLS) method to find out the impact of macroeconomic variables on corporate cash holdings. Also this paper extends the existing liquidity literature the Middle East and Jordan by delivering the macroeconomic variables as a determinant of cash holdings, aside from the traditional firm-specific variables. Moreover, the results of this paper are expected to help the government decision makers, investors and firms’ managers to understand the effects of macroeconomic variables and to hedge against the economic risks and take the right decisions insured the ongoing good performance of the firm.