This study examines the simultaneous relationship between cash holdings and dividend policy, using a sample of 80 non-financial, anonymous firms for the period 2010-2014. The results show that cash holdings are determined by dividend, debt, firm size, profitability, cash flow and risk. The dividend policy is determined by debt, firm size and profitability. Taking simultaneity into account shows a positive causality between cash holding and dividend policy. This causality shows that simultaneity is crucial in the analysis of corporate liquidity and dividend policy.
Paper No:
2195
