The impact of cash holding on stock returns for Listed Companies in the Egyptian stock exchange

Robust empirical insights are provided through this study concerning the relationship between corporate cash holdings and stock returns in Egyptian non-financial firms. A fixed-effects panel regression model was used with data on 103 firms listed on the Egyptian Stock Exchange (EGX). An analysis finding a linear and negative relationship between cash balances and returns to shareholders consistently suggests that excess liquidity for investors in an identified state like Egypt, characterized by macroeconomic instability, changing governance frameworks, and significant information asymmetries, appears not to be a precautionary asset but rather as a sign of managerial inefficiency or underutilized capital.

The absence of any significant non-linear (quadratic) effect goes on to challenge even further prior evidence coming from developed markets, which had emphasized the existence of optimal cash levels enhancing that firm value. Rather, the results obtained here suggest that in Egypt, there is an atmosphere of negative sentiment among investors toward high balances of cash, particularly so in case when capital deployment strategies are not communicated and transparent. The significance of control variables such as the market-to-book ratio, in the expected directions, confi
Overall, this study makes significant contributions to the fast-growing literature explaining the interaction of liquidity management and firm value in the context of emerging economies. The importance of further specific research in individual sectors to clarify the heterogeneity that characterizes cash policies and their influence on investor behavior throughout various organizational and institutional terrains is brought to light.rms the robustness and validation of the model.