This study explores the simultaneous relationship between corporate cash holdings and dividend policy using a large sample of around 400 non-financial firms for the period from 1991 to 2008. The results show that cash holdings are affected by dividends, leverage, growth, size, risk, profitability, and working capital ratio. Dividend policy is affected by cash, leverage, growth, size, risk, and profit. When controlling for simultaneity, dividend payments do not appear to significantly affect cash holdings, nor do cash holdings affect dividend policy. The empirical analysis suggests that simultaneity is crucial in analyzing corporate cash holdings and dividend policy.
Al-Najjar, B., & Belghitar, Y. (2011). Corporate cash holdings and dividend payments: Evidence from simultaneous analysis. Managerial and Decision Economics, 32(4), 231-241. https://doi.org/10.1002/mde.1529