Financial vs. Industrial Cash Policies: Evidence from Tunisia

Abstract

This study provides new empirical evidence on the sector-specific determinants of corporate cash holdings in the under-researched context of an African emerging market, Tunisia. Using a dynamic panel regression model on data from 79 listed firms (2008-2022), we demonstrate that the drivers of cash management strategies differ significantly between financial and industrial sectors. Our key findings reveal that financial firms' cash holdings are primarily influenced by leverage and the persistence of past policies, reflecting a focus on regulatory capital requirements and liquidity needs. In contrast, industrial firms' cash reserves are more strongly determined by firm size and dividend yield, highlighting the role of growth strategies and shareholder returns. These findings challenge the universality of established theories derived from developed markets and underscore the critical importance of sectoral and institutional context. Our main contribution is to bridge a notable gap in the literature by offering a direct comparative analysis within an African market, providing valuable insights for policymakers aiming to foster sector-specific financial stability and for managers optimizing liquidity strategies in emerging economies.