The cash game: An examination of the cash holding policies in the gambling industry

Abstract

This paper investigates the determinants of corporate cash holdings in the casino and gambling industry. The trade-off, pecking order and free cash flow theory are all popular methods for explaining the determinants of cash holdings for general firms. This paper examines traditional financial variables, macroeconomic variables and a specific time period variable for the effects of the financial crisis on the firms. Because of the characteristics of the industry, intangible assets are also investigated as an explanatory variable. Capital expenditures, dividend payments, intangible assets, leverage, and liquid asset substitutes all show a significant negative impact on cash holdings. The results are in accordance with most previous research for the impact of the variables. None of the macroeconomic variables in this paper shows any significance. The period of the crisis produces a significant result which means that it does affect the cash holdings in the industry in more ways than what can be explained by the other explanatory variables.

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