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Factors explaining the decision to hold liquid assets: dynamic analysis of Tunisian listed companies

In this paper, our aim is to study the factors that explain the decision to hold liquid assets. To this end, we examine a sample of 20 Tunisian companies listed on the stock exchange during the 2006–2015 periods. Specifically, we estimate a dynamic panel model that links change in liquidity holdings and some variables that may affect liquidity. The results indicate that companies opt for liquidity as a precaution for a possible financing need, mainly if these companies have difficulty accessing external financing sources. For a company, holding liquidity has two advantages: it allows them to easily cover their obligations and future investments and to retain some of its financial assets.