The Impact of Financial Leverage on Cash-holding Stickiness

Abstract

Cash-holding stickiness, the tendency of firms to maintain a steady level of cash reserves despite changes in their financial environment, has become a significant focus of financial studies. Financial leverage, defined as the ratio of a firm's total debt to its equity or assets, plays a pivotal role in determining cash management policies. This paper investigates the nuanced relationship between financial leverage and cash-holding stickiness, with emphasis on how economic conditions and firm-specific characteristics moderate this relationship. Using empirical data from 2020 to 2025, this study provides insights into the mechanisms driving cash retention behaviors among leveraged firms.