Abstract

The study examined the determinants of cash holdings by 12 deposit money banks in Nigeria using data that covered the 2008-2020 sample period. Panel data was sourced from the Nigerian Stock Exchange fact book, Annual financial statements, and cash flow reports of the selected banks. Econometric tools were employed to analyze such variables of interest as return on assets, asset tangibility, leverage, bank size and volume of deposits to assets. The empirical findings revealed that asset tangibility is a negative and an 'important factor in the determination of cash holding behaviour of deposit money banks in Nigeria. Return on assets does not have any significant relationship with cash holding; leverage has an insignificant positive impact on cash holdings; bank size has an insignificant negative relationship with cash holding; and volume of deposits to assets has a weak negative impact on deposit money banks’ cash holding behaviour. The empirical outcome calls for stringent cash holding policies which ensures that as a bank increases its cash holding, it will in turn enhance the overall performance of the bank. Also, since asset tangibility is found to be major determinant of banks cash holding behavior, it follows that banks should hold more cash in order to increase tangible assets. Thus, there is need for a policy framework that will ensure that as bank increases its cash holding, its corresponding tangible assets would also be enhanced.

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