Macroeconomic conditions, cash holdings, and financial constraints in restaurant firms

Firms with higher cash holding levels can undertake investment projects and pay off their obligations without any financial difficulties. However, unused excess cash could be detrimental to firm value because unutilized cash value could significantly depreciate over time. Thus, this paper aims to examine the extent to which macroeconomic factors affect restaurant firms’ cash holdings. We further examine the extent to which the level of financial restraints affects the link between macroeconomic factors and firms’ cash holdings in the US restaurant corporations. The results showed that interest rates affect restaurant firms’ cash holdings, while other macroeconomic factors do not.