Corporate cash holding and firm value in Saudi listed non-financial firms: The moderating role of financial expertise of the audit committee

The current study examines the association between Corporate Cash Holdings and Firm Value and explores whether the interaction effect of Cash Holdings and financial expertise supports fair value. The study used data on 175 non-financial firms from 2015 to 2023 and employed pooled OLS regression. The fair value variable denoted by Tobin’s Q shows an average (median) of 3.01, while the mean (median) of cash holdings and Audit Committee financial expertise was 18% (13%) and 45% (33%). This study finds a positive coefficient of 0.63, which is significant at less than a 1 percent level, revealing that cash holding increases the value of companies, promoting transaction and precautionary incentives for maintaining cash reserves. Interestingly, the study also finds the positive influence of cash holdings on fair value, which is enhanced by the financial expertise of the audit committee (positive coefficient of 0.04, significant at less than a 1 percent significance level). Moreover, the interaction of cash holdings with audit committee financial expertise found a positive coefficient of 1.84, which is significant at less than a 1 percent significance level. This study presents the importance of the Audit Committee mechanism, particularly with the presence of financial and accounting expertise, in supporting the market value of a company. The outcomes of this study benefit policymakers, managers, and investors regarding effective corporate liquidity management and its effect on fair value. AcknowledgmentThe author acknowledges that the current project under research project number PSAU/2023/02/25900 was funded by Prince Sattam Bin Abdulaziz University.