Cash Holding Determinants in the Greek Hotel Industry: SMEs Versus Large Firms

Abstract

The scope of this study is to examine the firm specific determinants of cash holdings which the Greek hotel industry and whether firm size is a crucial factor that impacts cash holding decisions. Small-Medium Enterprises (SMEs) present several distinct characteristics relative to larger firms such as higher information asymmetries and limited access to financial markets and external financing. Thus, SMEs face a different financial environment leading to different motives for holding cash reserves relative to their larger counterparts. This fact may be even more important for hotel firms which operate within a capital intensive sector. For this reason we selected a large sample of hotel firms (1201 firm-year observations) and separated them between SMEs and large firms over the period 2003–2016. Empirical evidence documented that SMEs with higher leverage, net working capital, lower total assets, tangible assets and distress risk tend to keep higher cash on their balance sheet in order to sustain their viability and finance daily operations. On the contrary, larger hotel firms which are more profitable and hove more tangible assets tend to hold more cash. In total, evidence support the precautionary motive of cash holdings in a higher extent for SMEs rather than large hotel corporations.