The mediating effect of Cash Flow Statement Indicators in the relationship between Mispricing and Firm's propensity to Hold Cash

Document Type : Research Paper

Authors

1 Accounting PhD student, Department of Accounting and Financial Management, Faculty of Economics and Management, Urmia University, Urmia, Iran

2 Associate Professor, Department of Accounting and Financial Management, Faculty of Economics and Management, Urmia University, Urmia, Iran

Abstract

The purpose of the present study is to investigate the mediating effect of Cash Flow Indicators in the relationship between mispricing and the Firm's Propensity to Hold Cash. Also, this study tries to examine the decision-making method of Tehran Stock Exchange member companies regarding their cash reserves when their shares are mispricing in the market. In this research, the information of 106 companies admitted to the Tehran Stock Exchange during the period of 11 years from 2012 to 2022 were used. Also, to analyze the data related to the research hypotheses, Eviews and Stata software have been used. The results of the first hypothesis showed that mispricing has a positive and significant effect on the Firm's propensity to hold cash. Also, the fitting of the statistical models of the second and third hypothesis shows the confirmation of the mediating effect of cash flow statement indicators in the relationship between mispricing and the Firm's propensity to hold cash, but more detailed investigations prove that the effects of mispricing is mostly transmitted through the channel of financing activities on the firm's propensity to hold cash. Also, the results show that companies tend to keep cash in the mispricing conditions, so that when necessary, they can use these saved funds for investment or other purposes.

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Main Subjects

Journal of Asset Management and Financing

Articles in Press, Accepted Manuscript
Available Online from 29 July 2024

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