DETERMINANTS OF CASH HOLDINGS OF SUBSIDIARIES OF MULTI-NATIONAL CORPORATIONS (MNCS) OPERATING IN PAKISTAN

Cash holding is a very essential matter for any firm to handle properly because it can ultimately affect firm performance. Cash holding is generating liquidity which allows the firm to easily avoid potential financial distress, however, holding too much cash represents an unused amount that is not generating any profit thus affecting the wealth of shareholders. The firms don't have any concise level of cash to hold therefore this study is aimed to examine the factors which are determining the Cash Holdings of Subsidiaries of Multi-National Corporations operating in Pakistan. Subsidiaries of MNCs were identified through “International Investment in Pakistan” published by State Bank of Pakistan (SBP). Six years of financial data were collected from another publication of SBP “financial statement analysis of companies (nonfinancial) listed at Karachi stock exchange (2008-2013)”. The dynamic panel data regression model such as pooled regression, fixed effect, and random effect has been run for analyzing the data in Eviews 9 to check what independent variable(s) determine the cash holding of subsidiaries of multinational firms in Pakistan. The Hausman test has confirmed the fixed effect model is appropriate. Cash flows volatility is significantly and positively, and the size of the firm and debt maturity is negatively related to the cash holding of sample firms, however, the result of debt maturity is significant at 0.1.