The Impact of Foreign Investment Components on Cash Holdings
Abstract
This study examines the impact of foreign investment components – institutional foreign investment, individual foreign investment, and Global Depository Receipts (GDRs) – on firms’ cash holdings. The sample comprises non-financial companies listed on the Egyptian stock market across 12 sectors during 2014–2024. Panel data are analyzed using ordinary least squares with fixed effects and verified through two-stage least squares estimation. The results indicate that individual foreign investment has a positive and significant effect on firms’ decision to hold cash, whereas GDRs exert a negative influence. Institutional foreign investment shows a positive but statistically insignificant effect. These findings suggest that different types of foreign investors play distinct roles in shaping corporate liquidity policies. The study provides practical implications for policymakers and regulators. Evidence can inform policies that balance the costs of cash retention with
the benefits of financial flexibility in the presence of foreign investment. It also offers guidance for regulatory bodies seeking to attract foreign investment while ensuring efficient liquidity management. For foreign investors, the results highlight the influence of their investment channels on firms’ financial behavior. By focusing on the Egyptian context, the research contributes to the limited literature on the relationship between foreign investment and cash holdings in emerging markets. The findings expand the understanding of how corporate financial policies respond to diverse investment flows in less developed institutional settings.
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