Abstract

XARA, Joana  and  VIEIRA, Elisabete. Determinants of liquidity of SMEs in the manufacturing industry in Portugal. Rev. Portuguesa e Brasileira de Gestão [online]. 2015, vol.14, n.1, pp.03-13. ISSN 1645-4464.

The purpose of this paper is to identify the determinants of cash holding in Portuguese Small and Medium Enterprises (SME), as well as to analyse to what extent these determinants differ in stability and economic crisis periods. We use panel data methods, considering a sample of 4.355 manufacturing Portuguese SME, for the period between 2002 and 2011. Overall, the results confirm the existence of a significant relationship between some of the considered variables and firms’ liquidity. Indeed, the results show a positive relationship between firm size and the probability of financial distress and the dependent variable, cash holdings, as well as a negative relationship between leverage and maturity debt structure and cash holdings. The results also show an effect of the crisis periods on the liquidity of the sample firms, including the reduction of short-term debt and leverage, as well as an increase in the cash conversion cycle.

Keywords : SME; Cash Holdings; Panel Data.

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