IMPACT OF OWNERSHIP STRUCTURE ON CASH CONCENTRATION: AN EVIDENCE FROM PAKISTAN’S TEXTILE SECTOR

Abstract

Poor cash management may result in failure of maintaining liquidity which leads to financial distress. The focus of this study is to examine the relationships between ownership structure and cash concentration. Change in ownership structure changes the philosophy of decision making. Current study aims to investigate whether change in ownership pattern brings any change in cash holding or cash concentration pattern. For this purpose, data is collected for 103 textile related firms for 5 years (2017-2021). The OLS regression model has been used for analysis. Results reveal that ownership concentration has no significant effect on cash concentration. Institutional ownership has a positive but insignificant effect. It is also found that insider ownership has negative coefficient but still statistically insignificant relationship with cash management. It is concluded from results that ownership structure has no significant direct relation with cash concentration but this relation is subject to intervention of some other control variables. The scope of this study is restricted to only three types of ownership structures and the textile sector in emerging markets. This study embarks on agency theory which exhibits agency problems and agency cost. This research contributes to literature by exploring the less discussed relationship of ownership and cash management.