The relationship between idiosyncratic risk and cash holding of companies listed on the Tehran Stock Exchange

Subject Areas : Journal of Investment Knowledge

mohammadreza olob ¹ (PHD Student of Accounting, Babol Branch, Islamic Azad University, Babol, Iran)
iman dadashi ² (Assistant Professor of Accounting, Qom University, Qom, Iran.)
hamidreza gholamnia roshan ³ (Assistant Professor of Accounting, Babol Branch, Islamic Azad University, Babol, Iran)

Received: 2020-04-14 Accepted : 2020-09-09 Published : 2022-09-23

Keywords: Tehran Stock Exchange, Agency cost, idiosyncratic risk, Cash holding,

Abstract :

The main purpose of this study is to investigate the relationship between idiosyncratic risk and cash holding of companies listed on the Tehran Stock Exchange. A total of 143 companies (1144 firm - year) have been studied during eight-year period of 2012-2019. The company's idiosyncratic risk is an important source of agency costs. Idiosyncratic risk is expected to indicate low management risk. Therefore, agency costs affect the discretionary idiosyncratic risk of the company's cash holding and allocating cash. Companies with discretionary idiosyncratic risk have more cash, and companies with high discretionary idiosyncratic risk have less cash reserves. The findings of the present study show that in general, there is a positive and significant relationship between special risk and cash holding.

References:

• بهرامی، لیلا؛ جاوید، داریوش(1397)، مروری بر مبانی نظری تأثیر ریسک سیستماتیک شرکت بر نسبت نگهداشت وجه نقد، چهارمین کنفرانس بین المللی مدیریت، کارآفرینی و توسعه اقتصادی، صص1-14.


• بهرامی، لیلا؛ فتحی، حمیرا(1398)، بررسی تاثیر ریسک سیستماتیک بر سطح نگهداشت وجه نقد، چهارمین کنفرانس ملی در مدیریت،حسابداری و اقتصاد با تاکید بر بازاریابی منطقه ای و جهانی، صص1-18.


• پورزمانی، زهرا؛ بشیری، علی(1392)، آزمون مدل کارهارت برای پیش بینی بازده موردانتظار به تفکیک سهام رشدی و ارزشی، مجله مهندسی مالی و مدیریت اوراق بهادار، شماره 16، صص 93-107.


• رمضان نیا، حسن، رضایی، فرزین(1396)، تاثیر ریسک سیستماتیک و ریسک فوق العاده بر سطح نگهداشت وجه نقد شرکت های پذیرفته شده در بورس اوراق بهادار تهران، هشتمین کنفرانس بین المللی حسابداری و مدیریت و پنجمین کنفرانس کارآفرینی و نوآوری های باز، صص1-12.


• رهنمای رودپشتی، فریدون؛ میرغفاری، سیدرضا(1392)، ارزیابی عملکرد پرتفوی در بورس اوراق بهادار تهران: کاربرد ارزش در معرض خطر (value at risk)، مجله مهندسی مالی و مدیریت اوراق بهادار، شماره 17، صص 1-21.


• علی دوست، آیدا؛ نوروش، ایرج؛ یاری فرد، رسول(1397)، بررسی عوامل موثر بر سطح نگهداشت وجه نقد در شرکت های پذیرفته شده در بورس اوراق بهادار تهران، دومین کنفرانس مدیریت، حسابداری و مهندسی صنایع، صص1-18.


• فرهنگیان، عقیل؛ حیدرپور، فرزانه(1398)، تاثیر کیفیت اطلاعات حسابداری بر جریان نقد عملیاتی، پژوهش های تجربی حسابداری، سال 8، شماره 22، صص 121-141.


• نقیبی، زینت؛ احدی سرکانی، سید یوسف(1397)، اثر حضور سرمایه گذاران نهادی بر رابطه میان ریسک سیستماتیک و نگهداشت وجه نقد، کنفرانس ملی اندیشه های نوین و خلاق در مدیریت، حسابداری مطالعات حقوقی و اجتماعی، صص1-16.


• Acharya, V. V., Davydenko, S. A., & Strebulaev, I. A. (2012). Cash holdings and credit risk. Review of Financial Studies, 25, 3572_3609.


• Ai, H., & Kiku, D. (2015). Volatility risks and growth options. Management Science, 62(3),


• Alessandro Di Nolay(2018), Idiosyncratic Firm Risk, Cash Holdings and Lumpy Investment, https://sites.google.com/site/alessandrodinolaphd


• Ashford, R. W., Berry, R. H., & Dyson, R. G. (1988). Operational research and financial management. European Journal of Operational Research, 36(2), 143_152.


• Bates, T. W., Kahle, K. M., & Stulz, R. M. (2009). Why do U.S. firms hold so much more cash than they used to? Journal of Finance, 64(5), 1985_2021.


• Baum, C.F., Caglayan, M., Ozkan, N., Talavera, O., (2006). The impact of macroeconomic uncertainty on non-financial firms’ demand for liquidity. Review of Financial Economics 15, 289–304.


• C Lam F.Y. Eric. Tai Ma, Shujing Wang, K.C. John Wei(2015), On the Positive Relation between Cash Holdings and Stock Returns, This version: July 2015.


• Cao Cathy Xuying, Chongyang Chen, Jot Yau(2016), Corporate Cash Holdings, Stock Returns, and Firm Expected Uncertainty.


• Chen Y. Podolski, E. and V.Madhu.2015. Does managerial ability facilitate corporate innovative success? Journal of Empirical Finance, vol. 34, issue C, 313-326


• Deng Haoyan Kebin Chen Dongmin Kong , (2014),"The effect of idiosyncratic risk on firm decisions: underinvestment or diversification?", China Finance Review International, Vol. 4 Iss 3 pp. 271 – 288


• Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 356.


• Ferreira, M., & Laux, P. A. (2007). Corporate governance, idiosyncratic risk, and information flow. Journal of Finance, 62, 951_989


• Garvey, G., & Milbourn, T. (2003). Incentive compensation when executives can hedge the market: Evidence of relative performance evaluation in the cross-section. Journal of Finance, 58,


• Harford, J., Mansi, S., & Maxwell, W. (2014). Corporate governance and firm cash holdings in the S. Journal of Financial Economics, 87, 535_555.


• Hieu V. Phan, Nam H. Nguyen, Hien T. Nguyen, Shantaram Hegde(2019), Policy uncertainty and firm cash holdings, Journal of Business Research 95 (2019) 71–82.


• Irvine, P. J., & Pontiff, J. E. (2009). Idiosyncratic return volatility, cash flows, and product market Review of Financial Studies, 22, 1149_1177.


• Jin, L. (2002). CEO compensation, diversification, and incentives. Journal of Financial Economics, 66, 29_63.


• John, K., & Kadyrzhanova, D. (2012). Agency costs of idiosyncratic volatility, corporate governance, and investment. Working Paper. Presented at the 2012 AFA Annual Meetings, Chicago,


• John, K., Litov, L., & Yeung, B. (2008). Corporate governance and managerial risk-taking. Journal of Finance, 63, 1679_1728.


• Miller, M. H., & Orr, D. (1966). A model of the demand for money by firms. Quarterly Journal of Economics, 80, 413_435.


• Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of Financial Economics, 52, 3_46.


• Pae Yuntaek, Sung C. Bae, Namhoon Lee , Idiosyncratic volatility and cash flow volatility: New evidence from S&P 500. The address for the corresponding author was captured as affiliation for all authors. Please check if appropriate. Finana(2017), https://doi.org/10.1016/j.irfa.2018.01.001


• Palazzo, Berardino, 2012. Cash holdings, risk, and expected returns. Journal of Financial Economics 104, 162-185.


• Panousi, V., & Papanikolaou, D. (2012). Investment, idiosyncratic risk, and ownership. Journal of Finance, 67, 1113_1148.


• Premachandra, I. M. (2004). A diffusion approximation model for managing cash in firms: An alternative approach to the Miller_Orr model. European Journal of Operational Research, 157(1),


• Servaes, H., & Tamayo, A. (2013). How do industry peers respond to control threats? Management Science, 60(2), 380_399.


• Simutin, Mikhail, 2012. Excess cash and stock returns. Financial Management 39, 1197-1222


• Srinivasan, V., & Kim, Y. H. (1986). Deterministic cash flow management: State of the art and research directions. Omega, 14(2), 145_166.


• Van Son Lai, Duc Khuong Nguyen, William Sodjahin, Issouf Soumaré, "Discretionary Idiosyncratic Risk, Firm Cash Holdings, and Investment" In Advances in Pacific Basin Business, Economics and Finance. Published online: 21 Aug 2018; 51-75


• Vidal-Garcı´a, J., & Vidal, M. (2014). Seasonality and idiosyncratic risk in mutual fund performance. European Journal of Operational Research, 233(3), 613_624.


• Wang, H., Yang, Z., & Zhang, H. (2015). Entrepreneurial finance with equity-for-guarantee swap and idiosyncratic risk. European Journal of Operational Research, 241(3), 863_871.


• Zuckerman, G. (2005). Cash-rich firms feel pressure to spend. The Wall Street Journal, C1, July 11. Available in: http://www.wsj.com/articles/SB