The purpose of this study is to investigate the effect of firm structure (whether\ndiversified or focused firms) on corporate cash holding. Samples of 80\nnon-financial companies were selected including diversified and focused\nfirms which were listed on Karachi stock exchange for a period 7 years from\n2006 to 2013. These diversified and focused firms were selected on the basis\nof equal proportionate method. Random effect model and descriptive statistics\nwere used for the analysis of these variables. The results of these models\nshowed that there is negative and significant effect of firm structure on corporate\ncash holding. We also find negative and significant relationship of leverage\nand Networking capital with the corporate cash holdings and the\nrelation between growth opportunities and corporate cash holding was examined\nto be positive and significant. We also find a negative and insignificant\nrelationship between firm size and corporate cash holding. The descriptive\nstatistics showed that there was significant difference between the cash\nholding of diversified and focused firms. The diversified firms keep a smaller\namount of cash as compare to the single segment companies (focused firms),\nwhich is in support of the trade-off theory. This paper contributes to current\nliteratures with regard to organization structure (whether diversified or focused\nfirms) on cash holding in a developing economy like Pakistan.
Loading....