WHAT MOTIVES POLISH NON-FINANCIAL LISTED COMPANIES TO HOLD CASH AND LEND MONEY TO OTHER FIRMS?

This paper aims to identify factors influencing Polish non-financial corporate cash holdings and lending money to other entities. The analysis takes into consideration the valuation in fair value of derivative instruments, long-term financial assets and investment properties. The research analyzed data of 4,860 firm-year observation of 754 non-financial companies listed on the Warsaw Stock Exchange, retrieved from the Notoria database, with use of the probit panel and generalized least squares method. Results confirm that non-financial listed companies are motivated to hold cash by the transaction motive, a protection against risk by the use of derivatives and investment opportunities. They try to step into the shoes of financial institutions by lending money to companies with use of money gained from the cash flow from their operations, especially when they have long-term financial assets or real estate investments. However, more indebted companies hold less money and lend less money to other firms.