This study aims at testing the partial adjustment model of cash holdings to investigate whether Jordanian industrial firms have a target cash holdings and how fast they move toward that target when any target deviation exists. A sample of 57 industrial firms listed in the Amman Stock Exchange (ASE) over the period 2001-2013 is used. The study uses the estimated fitted values from the conventional cash equation as a proxy for the target cash holding. Using pooled and panel data analysis, the study provides evidence suggesting that cash flows, net working capital, leverage and firm size significantly affect the cash holdings of Jordanian firms. Moreover, it reveals that Jordanian industrial firms have a target cash level and make a target reversion whenever needed. However, Jordanian industrial firms adjust their actual cash holdings to its target level too slowly.
CITATION STYLE
Zurigat, Z. M., & Jawdat, N. (2015). Testing the partial adjustment model of optimal cash holding: Evidence from amman stock exchange. Corporate Ownership and Control, 13(1), 15–23. https://doi.org/10.22495/cocv13i1p2
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