Sectoral Differences in The Impact of Cash Holdings on Bankruptcy Risk: Evidence From Uzbekistan

Abstract

Research aim: This study aims to investigate the impact of corporate cash holdings on
bankruptcy risk, with particular emphasis on sectoral differences in Uzbekistan.
Design/ Methodology/ Approach: This study uses a robust panel dataset of 299 listed
firms in Uzbekistan over the period 2014-2021 (2,301 firm-year observations). Panel
regression techniques are employed to examine the relationship between cash holdings
and bankruptcy risk across various industry sectors.
Research finding: The findings reveal that corporate cash holdings significantly reduce
bankruptcy risk, especially in the manufacturing-related industries. The sectoral analysis
highlights disparities in financial resilience and risk exposure, indicating the importance
of industry-specific financial strategies.
Theoretical contribution/Originality: This study provides evidence from an underresearched
transitional economy, thereby enhancing our understanding of firm-level
financial behaviour in emerging markets. The findings support the relevance of trade-off
theory in Uzbekistan, while suggesting that free cash flow theory may require contextual
adaptation.
Practitioner/Policy implication: The results underscore the need for policymakers and
practitioners to adopt differentiated approaches when designing financial regulations and
firm strategies. Particularly, strengthening liquidity management in the manufacturing
sector can enhance corporate resilience.
Research limitation: The study is limited by its focus on a single country, potential data
constraints, and the exclusion of certain variables. These limitations open avenues for future
research to explore cross-country comparisons and incorporate broader macroeconomic
indicators.