This study examines the determinants of cash-holding levels for US hotel firms. Using data from 67 publicly
traded US hotel firms from 1997 to 2008, we construct a weighted least-squares (WLS) regression model to test the
roles of seven firm-specific factors in establishing corporate cash-holding levels. Firm size, cash flow from
operations, and dividend paying correlated negatively with cash reserves, while leverage, investment-opportunity set,
and capital expenditures were positively related to cash-holding levels. Net working capital was insignificantly
related. These findings support the trade-off theory in general and the precautionary motive and the transaction
motives specifically as important drivers of cash holdings decisions in today’s hotel firms.
key words : cash-holding levels, precautionary motive, trade-off theory, transaction motive
traded US hotel firms from 1997 to 2008, we construct a weighted least-squares (WLS) regression model to test the
roles of seven firm-specific factors in establishing corporate cash-holding levels. Firm size, cash flow from
operations, and dividend paying correlated negatively with cash reserves, while leverage, investment-opportunity set,
and capital expenditures were positively related to cash-holding levels. Net working capital was insignificantly
related. These findings support the trade-off theory in general and the precautionary motive and the transaction
motives specifically as important drivers of cash holdings decisions in today’s hotel firms.
key words : cash-holding levels, precautionary motive, trade-off theory, transaction motive
20110811.pdf
