Cash holding, risk-taking behavior and financial performance of non-financial firms listed in sub-Saharan Africa Securities Exchanges

Abstract

The study examined the linkage between cash holding, risk-taking and financial performance of listed non-financial corporations using the two-step system GMM method. GMM's outcome was then compared across the agricultural, manufacturing and construction industries. Cash holding and risk-taking had a statistically significant positive association with ROA, ROE and Tobin's Q in agricultural and manufacturing listed firms. However, cash holding and risk-taking had a statistically significant negative association with ROA, ROE and Tobin's Q in construction-listed corporations. To the authors’ knowledge, this is the first study to investigate the linkage between cash holding, risk-taking and performance of listed non-financial corporations across different industries in SSA. This study contributes to and extends the literature with current empirical evidence with analysis based on the various sub-sectors of the listed non-financial corporations. The study is useful to policymakers when establishing guidelines that suggest optimal cash-holding and risk-taking levels for listed non-financial corporations. Additionally, the study is useful to the managers of listed non-financial corporations when making strategic decisions, helping the managers balance liquidity management and risk exposure.