Determinants of Cash Holdings and the Effect of Internationalization

Abstract

This thesis studies cash holding determinants from the point of view of internationalization and diversification. The existing literature on these concepts have not acknowledged one another and the previous findings suggest them to have opposing impacts on the level of cash holdings. This thesis attempts to combine the effects of internationalization and diversification within a single variable measuring geographical spread of operations for a company. The findings suggest that geographical spread has a slight positive influence on cash holdings in general, but the effect sometimes reverses, when several subsamples are studied. Geographical spread itself seems to have non-linear relationship with cash holdings. The thesis concludes that various other company characteristics have an impact on the dynamic between geographical spread and cash holdings.