Intellectual capital efficiency, institutional ownership and cash holdings: a cross-country study

Dalwai, T ORCID: https://orcid.org/0000-0001-5754-5384, Mohammadi, SS and Satrovic, E, 2024. Intellectual capital efficiency, institutional ownership and cash holdings: a cross-country study. Review of Accounting and Finance, 23 (1), pp. 104-129. ISSN 1475-7702

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Abstract

Purpose: This study investigates the roles of intellectual capital efficiency and institutional ownership on cash holdings and their speed of adjustment.

Design/methodology/approach: Using a sample of 432 firm-year observations of tourism-listed companies, three measures of cash holdings are used as dependent variables and intellectual capital efficiency and institutional ownership as independent variables. The financial data is collected from the S&P Capital IQ database for the period 2015 to 2020. Two system-generalized methods of moment estimation are used for the robustness checks of the results.

Findings: The study provides evidence that an increase in intellectual capital efficiency in tourism firms results in lower cash holdings. The research findings also report that characteristics such as firm size, age and market-to-book value ratio are associated with cash holdings. Furthermore, institutional ownership in these firms did not affect the cash holdings. The results also confirm the existence of a target cash holding level to which the tourism firms attempt to converge. These results are robust to the alternative proxy of cash holding and endogeneity tests.

Research limitations/implications: The study uses intellectual capital efficiency measured by the model proposed by Pulic. Alternative measures of intellectual capital can be included in future studies. Future research can also investigate the impact on cash holdings before and during the pandemic for tourism companies. The study is limited to the impact of institutional ownership thus research can be extended to consider other types of ownership.

Practical implications: The findings of this study indicate that tourism companies should take into account the impact of intellectual capital efficiency on their cash holdings decisions. The industry uses a specific financial management strategy in light of better efficiency and possibly values the opportunity cost of holding more cash. Additionally, regulators should re-examine the role of institutional ownership in tourism firms as it was found to have no impact on cash holdings. The regulators may need to consider other factors, such as firm size and age, when developing policies and regulations to ensure that tourism firms have adequate cash holdings.

Originality/ Value: This study adds to the body of knowledge on the factors that influence cash management and ideal cash levels for the tourism industry. The examination of the effect of intellectual capital on cash holdings is a novel contribution, filling a gap in the existing literature. The findings on the speed of adjustment towards optimal cash holdings also provide support for the trade-off theory.

Item Type:	Journal article
Publication Title:	Review of Accounting and Finance
Creators:	Dalwai, T., Mohammadi, S.S. and Satrovic, E.
Publisher:	Emerald
Date:	10 January 2024
Volume:	23
Number:	1
ISSN:	1475-7702
Identifiers:	Number Type 10.1108/raf-01-2023-0015 DOI 1875652 Other
Rights:	© 2023, Emerald Publishing Limited. This AAM is provided for your own personal use only. It may not be used for resale, reprinting, systematic distribution, emailing, or for any other commercial purpose without the permission of the publisher.
Divisions:	Schools > Nottingham Business School
Record created by:	Laura Ward
Date Added:	22 Mar 2024 14:16
Last Modified:	22 Mar 2024 14:16
URI:	https://irep.ntu.ac.uk/id/eprint/51138

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