Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Determining the Association between Monetary Policy, Corporate Investments and Cash Holdings

Author(s): Asad Yaqub, Muhammad Awais, Saira Aslam, Muhammad Mohsin, Ajid Ur Rehman

This study is investigating the effect of monetary policy (growth rate), corporate cash holdings (separate and moderating effect) and financial constraint on the corporate investments decisions of listed 200 non-financial firms from Pakistan stock exchange for the sample period of 2006-18. The Altman Z-score, used to measure financial constrain which consist of tangibility, operating cash flow, leverage and size in this study. A deductive and quantitative methodology has been utilized in this study while random effect model and GMM is used to investigate panel information. Monetary policy for financially constrained firms has significant negative relation with their investment level while insignificant for unconstrained firms based on their size. Similarly monetary policy of financially constrained and unconstrained firms has significant negatively relation to their investment based on their networking capitals. MP into cash (moderating effect) has insignificant to investment levels based on all models. Tangibility has inversely significantly related to corporate investment in fixed effect and GMM model. Size has significantly related in all the models for both constrained and unconstrained firms while operating cash flow insignificant.

Get the App