The Moderating Impact of Political Connections on the Relationship Between Cash Holdings and Firm Viability in Emerging Economies: Empirical evidence from Egypt

The main purpose of this paper is to examine the impact of cash holdings on the viability of Egyptian listed firms. In addition, it investigates the moderating impact of political connections on the relationship between cash holdings and firm viability in the emerging market of Egypt. This study covers the period spanning 2014 to 2019. The results indicate that firms’ cash holdings level has a significant positive impact on a firm’s viability within Egyptian firms. Moreover, political connections variables after the Arab Revolution period were found to have no direct relationship with firms’ viability. While the interaction between the first political connection measure; political connectivity and cash holdings have a significant negative impact on firm viability due to negative reactions from the market that tries to reduce corruption and improve its political environment.  However, the interaction between cash holding and the second political connection measure; political strength, was found to have a significant positive impact on firm viability. This positive impact could be interpreted by using a different measure for political connection. Further, the increase in the number of politicians will support the good reputation of those firms in such period and its interaction with the cash would help improve firms’ viability eventually. Cash holding might be a crucial mean of sustaining Egyptian firms’ viability. This study provides useful managerial implications and contributes to the ongoing debate about the impact of cash holdings on corporate performance.