This study aims to investigate the association between corporate risk-taking and cash holdings, and whether financial constraints moderate this association.
Regression analyses were applied to 606 firm-year observations from Saudi Arabia from 2011 to 2020.
Firms with higher risk-taking exhibit higher cash holdings, whereas financially constrained firms have lower cash holdings. The positive association between corporate risk-taking and cash holdings is weaker for financially constrained firms than for nonconstrained firms.
For investors, investment decisions that include the cash holding assessment would also consider the firm-level uncertainty surrounding the firms.
This study explores the joint effect of corporate risk-taking and financial constraints on cash holding, and hence considers the strategic adaptations to navigate uncertainty in strategies related to cash holdings in Saudi Arabia.
