Equities and Cash Holdings: A Long-Term Analysis of Turkish Construction Firms

Abstract

Being at the first sight bank credits have been implicit in leverage, and among the significant determinants of long-term returns along with cash for many sectors. However, equities could have been neglected in this perspective. A sustainable proportional level of equities with the help of a return variable may alter the expectations on bank credit effect, and in this context; this study aims to reveal whether there exists a set of identical determinants for cash holdings in the case of the Turkish construction sector. By assessing a set of aggregate data from the balance sheets of the businesses in this very sector, we have eliminated most of the variables and written two models in which an alternative return indicator is considered an extra independent to significantly presume cash and cash equivalents in the selected sector. We therefore conclude that both return on assets and return on equities could be used interchangeably. In the analysis, the essential variables are revealed as equities on assets and the ratio of bank credits in the short-term on current liabilities. The study also asserts robust results for both independent returns with the same set of predictors in which bank credits are not alone in a leading role, however, equities stand to be qualified as a sustainable contributor to liquidity as well.