Investigation of the excess cash holding on value of firms

Abstract

The present research tried to study the effect of the excess cash holding on firm value. The participants of the present research include the companies accepted in Tehran Stock Exchange during the years between 2003 and 2010, which are among the five industries of food, cement, drugs, chemicals, and automobile parts and by using a sampling method 482 year-companies were selected. To test the research hypotheses, two multiple regression models were used, which were first supplied by utilizing a model devised by Opler & et al (1999) and it is called OPSW to determine the appropriate level of cash holdings for each company in each year. Then, Lozano's model (2011) was utilized to measure the effect of the excess cash holding on firm value. The results of testing the research hypotheses showed that the excess cash holding affects firm value negatively meanwhile the investment policy.