Corporate Cash Holdings and Agency Conflicts: Evidence from Moroccan Developing Market

Abstract

The topic of corporate cash holdings has received relatively little attention from academic researchers. However, this decision has always been at the center of interest of any company seeking to improve its performance. This article aims to examine the relationship between agency costs related to managerial discretion and cash holdings by Moroccan companies. In order to do this, we will mobilize both agency theory and free cash flow theory. To date, and to our knowledge, no research has been conducted on the cash flow of Moroccan companies in the light of agency theory. This study contributes to cash holdings research in Morocco by exploring the reasons for holding cash through a sample of Moroccan non-financial companies that are listed on the Casablanca Stock Exchange for a period of 12 years (from 2007 to 2018). This research uses econometric models based on a positivist approach with a hypothetical-deductive method. Our results show that there is a strong positive relationship between cash holdings and cash flow. It also turns out that the liquidity of these companies is significantly negatively affected by the debt leverage and the growth opportunities of the company.