Cash Holding in Brazilian local governments

Research Objective: The research aimed to examine the cash retention determinants of Brazilian local governments. Theoretical framework: This work is based on the liquidity preference theory of finance. Methodology: this is an econometric research developed with economic and financial data from the years 2017 to 2021 of Brazilian municipalities, using the linear regression model with panel data, fixed effects. Results: The results showed that variations in personnel expenses and charges, imprecision in forecasting current revenues, dependence on revenues and population are determinants of cash holding in Brazilian local governments. Originality: The results fill an existing gap in the public finance literature on what would be the cash retention determinants of Brazilian local governments. Theoretical and practical contributions: The results contribute to a discussion on cash retention policies in governments of emerging countries and contribute to the literature that discusses the flypaper effect, given that the effect can occur in years following the inflow of revenue, not addressed by the literature. Finally, the research presents the inaccuracy of forecasting current revenues as a new determinant of cash holding in local governments.