Corporate cash holdings and disclosure violations: an empirical investigation of Jordanian listed companies

Abstract

Purpose

This study aims to examine the impact of low-quality financial statements; that is, disclosure violations reported by the Securities Exchange Commission related to the level of cash holdings (CH) of firms listed on the Amman Stock Exchange (ASE).

Design/methodology/approach

Using panel data from 107 ASE-listed companies from 2009 to 2018, the study uses generalized method of moment estimation to examine the research hypothesis. This study hypothesize that disclosure violations can affect the level of CH and control for several variables that affect this level.

Findings

The results show that disclosure violations significantly affect the level of CH and that cash flow, capital expenditure and debt issues have a significantly positive impact on corporate CH. On the other hand, the market to book ratio and sales growth were found to be insignificant.

Research limitations/implications

The limitations of the research include the fact that information on research and development and equity issues were not available, so were not included in the examination.

Practical implications

It is recommended that managers enhance the quality of disclosures since this allows them to hold lower levels of cash and exploit more investment opportunities. Policymakers are recommended to supervise firm disclosures closely and create ratings for disclosure quality.

Originality/value

To the best of the author’s knowledge, this is the first empirical research on the association between proven low-quality disclosures and the level of corporate CH among Jordanian listed companies.

Citation

Alsmadi, S., Alkhataybeh, A. and Shakhatreh, M.Z. (2022), "Corporate cash holdings and disclosure violations: an empirical investigation of Jordanian listed companies", Journal of Islamic Accounting and Business Research, Vol. 13 No. 3, pp. 568-580. https://doi.org/10.1108/JIABR-07-2021-0199