Small Business Economics

, Volume 53, Issue 4, pp 1051–1078 | Cite as

Cash holdings and SME performance in Europe: the role of firm-specific and macroeconomic moderators

  • Maurizio La RoccaEmail author
  • Raffaele Staglianò
  • Tiziana La Rocca
  • Alfio Cariola
  • Ekaterina Skatova


For the first time, this paper examines the way in which cash holdings affect firm operating performance in a wide sample of European small and medium-sized enterprises (SMEs). Our results suggest that cash holdings have a positive effect on operating performance, supporting the relevance of precautionary savings motive for SMEs. Maintaining a buffer of money on hand, ready for use in any contingency, has a relevant positive effect that overcomes potential opportunistic problems. Moreover, we find that firm-specific characteristics, such as debt, size, age, growth opportunities, and ownership concentration, moderate our baseline relationship. In addition, the study also demonstrates that cash holdings have a stronger positive effect on operating performance in poorer institutional contexts. Notably, we also find that the stock of cash had a relevant role in supporting firm performance during the recent global financial crisis. Finally, we report additional analyses to corroborate our baseline results.


Cash holdings SMEs Firm operating performance Institutional context 

JEL classification

G32 G33 L26 

Supplementary material

11187_2018_100_MOESM1_ESM.doc (96 kb)
ESM 1 (DOC 96 kb)


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • Maurizio La Rocca
    • 1
    Email author
  • Raffaele Staglianò
    • 2
    • 3
  • Tiziana La Rocca
    • 3
  • Alfio Cariola
    • 1
  • Ekaterina Skatova
    • 1
  1. 1.Department of Business Administration and LawUniversity of CalabriaArcavacata di RendeItaly
  2. 2.Montpellier Business School, Montpellier Research in ManagementMontpellierFrance
  3. 3.Department of EconomicsUniversity of MessinaMessinaItaly

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