Cash management in the travel and leisure sector: evidence from the United Kingdom

ABSTRACT

This study investigates the determinants of cash holdings for companies operating in the travel and leisure (TL) sector of the United Kingdom (UK) between 2005 and 2016. The study finds that growth opportunities, cash flow, and cash flow volatility affect cash holdings positively, while size, leverage, liquidity, asset intangibility and dividend payments affect negatively. Companies operating in the airlines sub-sector hold more cash, while companies in the hotels and restaurants and bars sub-sectors hold less cash than the reference sub-sector of travel and tourism. Except for the free cash flow model, the trade-off and pecking order models of cash holdings are empirically supported for the TL sector.

KEYWORDS:

• Cash
• determinants
• hospitality
• travel and leisure
• tourism
• United Kingdom

JEL CLASSIFICATION:

• Z33
• Z31
• L83
• L8
• G32
• G3

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The set of information is retrieved from http://www.e-unwto.org/doi/pdf/10.18111/9789284418145.

² To select between the fixed effects and random effects models, unlike the one-way error component model, the Hausman test does not hold for two-way error component model (Baltagi 2005, 73). Nevertheless, the authors estimate the random effects model, and the results are qualitatively similar but exhibit lower statistical significance power. The results are available from authors upon request.