The value of cash holding and the financial crisis : evidence from Jordan

Abstract EN

This research has investigated the effect of the recent financial crisis on the value of cash holding among a sample of 80 non-financial listed firms from Jordan during the period 2001-2011.

Using fixed-effect panel data analysis, the study has shown that cash is valued at a discount in Jordan since the corporate governance system is weak, investors have poor protection, and free cash flow and agency problems exist.

As a result of the financial crisis, external financing has become more difficult and expensive, thus, causing shareholders in Jordan to value cash at a premium since the crisis.

Also, considering Jordan as a special setting, debt financing is less preferred for religious reasons, which means that a higher level of cash holding is considered to be positively related to firm value.