Investigating the Effect of Business Strategy and Corporate Governance on Cash Balance Policies of Listed Companies in Tehran Stock Exchange

Document Type : Original Article


1 Department of Accounting, University of Science and Culture, Tehran, Iran

2 Department of Accounting, Shahab Danesh University, Qom, Iran

3 Department of Accounting University of Science and Culture, Tehran, Iran


This study aims to investigate the effect of business strategy and corporate governance on maintaining cash balance policies in companies listed on the Tehran Stock Exchange. Accordingly, the annual data of 108 listed companies on the Tehran Stock Exchange during 2011 to 2019, unit root panel tests of Im, Pesaran, and Shim and Levin–Lin–the Chu was used. In addition, the f test was used to select one of the panel data and pooled data methods, and the Hausman test was used to select one of the fixed effects and random-effects models. This study showed that the company's strategy had a negative and significant effect on the cash balance of listed companies on the Tehran Stock Exchange. Thus, it can be stated that with increasing the company's prospector business strategies, the need for investment and innovation in the company will increase. Accordingly, companies' cash balance will decrease. Also, with an increase in the proportion of non-executive members on the board, the cash balance of companies decreased due to the lack of attention to voluntary opportunities, so the cash balance decreased significantly.


  1. Almeida, H. Campello, M. Cunha, I. and Weisbach, M. S. (2014). Corporate liquidity management: A conceptual framework and survey. Rev. Financ. Econ., 6(1), 135-162.
  2. Acharya, V. Davydenko, S. A. and Strebulaev, I. A. (2012). Cash holdings and credit risk. The Review of Financial Studies, 25(12), 3572-3609.
  3. Al-Najjar, B. (2013). The financial determinants of corporate cash holdings: Evidence from some emerging markets. International business review, 22(1), 77-88.
  4. Boubaker, S. Derouiche, I. and Nguyen, D. K. (2015). Does the board of directors affect cash holdings? A study of French listed firms. Journal of Management & Governance, 19(2), 341-370.
  5. Chen, Y. R. (2008). Corporate governance and cash holdings: Listed new economy versus old economy firms. Corporate Governance: An International Review, 16(5), 430-442.
  6. Dittmar, A. Mahrt-Smith, J. and Servaes, H. (2003). International corporate governance and corporate cash holdings. Journal of Financial and Quantitative analysis, 38(1), 111-133.
  7. Fernandes, N. and Gonenc, H. (2016). Multinationals and cash holdings. Journal of Corporate Finance, 39, 139-154.
  8. Ferreira, M. A. and Vilela, A. S. (2004). Why do firms hold cash? Evidence from EMU countries. European financial management, 10(2), 295-319.
  9. A, J. (2013). Consequences of real earnings management and weak corporate governance: evidence from cash holdings. available at http: www.utexas.summon. com,retrieverd on 10. 02. 2013.
  10. Harford, J. Mansi, S. A. and Maxwell, W. F. (2008). Corporate governance and firm cash holdings in the US. Journal of financial economics, 87(3), 535-555.
  11. Higgins, D. Omer, T. C. and Phillips, J. D. (2015). The influence of a firm's business strategy on its tax aggressiveness. Contemporary Accounting Research, 32(2), 674-702.
  12. Joudi, S. Mansourfar, G.and Didar, H. (2019). Internal and External Corporate Governance Quality, Information Asymmetry and Cash Holdings: Increase or Decrease in the Firm Value. Accounting and Auditing Review, 26(1), 39-64.
  13. Kuan, T. H. Li, C. S. and Chu, S. H. (2011). Cash holdings and corporate governance in family-controlled firms. Journal of Business Research, 64(7), 757-764.
  14. Magerakis, E. and Tzelepis, D. (2020). The impact of business strategy on corporate cash policy. Journal of Applied Accounting Research. 21(4), pp. 677-699.
  15. Navissi, F. Sridharan, V. G. Khedmati, M. Lim, E. K. and Evdokimov, E. (2017). Business strategy, over-(under-) investment, and managerial compensation. Journal of Management Accounting Research, 29(2), 63-86.
  16. Orlova, S. V. and Sun, L. (2018). Institutional determinants of cash holdings speed of adjustment. Global Finance Journal, 37, 123-137.
  17. Raei, R. Fayyaz Heidari, K. Basakha, H. and Movaghari, H. (2019). Identification of the Factors Affecting Stored Corporate Cash in Tehran Stock Exchange: Robust Variable Selection Technique. Financial Research Journal, 21(1), 1-18.
  18. Ward, C. Yin, C. and Zeng, Y. (2018), Institutional investor monitoring motivation and the marginal value of cash. Journal of Corporate finance, 48, 49-75.
  19. Wai, W. Y. and Zhu, Y. (2013). The Effect of Corporate Governance on Cash Holdings: Evidence from Hong Kong (Doctoral dissertation, Doctoral dissertation, Hong Kong Baptist University Hong Kong).
  20. Wu, W. Rui, O. M. and Wu, C. (2012). Trade credit, cash holdings, and financial deepening: Evidence from a transitional economy. Journal of banking & finance, 36(11), 2868-2883.