Cash Holdings and Financial Performance of Listed Manufacturing Firms in Nigeria: A Quantile Regression Analysis

Abstract

Listed manufacturing firms around the world hold substantial volume of cash and studies of the effect of cash holdings have consistently yielded mixed results. This study contributed to the literature by utilizing quantile regressions to assess the effect of cash holdings on financial performance of manufacturing firms listed on the Nigerian Exchange Group (NGX) from 2011 to 2024. The sample of the study comprised of 20 Consumer Goods and Industrial Goods manufacturing firms. The study sourced data from the annual reports of the sampled firms and Daily Official List of NGX. It measured cash holdings as cash plus marketable securities deflated by total assets and used return on assets as the proxy for financial performance. Pecking Order Theory and Free Cash Flow Theory constituted the theoretical anchor of the study. Findings revealed that cash holdings have positive effect on financial performance but the level of significance varied across the quantiles. The study recommended that firms should pay close attention to the level of cash holdings at various quantiles. It suggested further studies using more than one proxies for cash holdings and financial performance respectively.

Keywords

• Cash holdings
• financial performance
• manufacturing firms
• quantile regressions

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