Cash holdings in an emerging market technology sector: evidence from BIST firms within the trade-off and pecking order frameworks

This study investigates the determinants of corporate cash holdings in technology firms listed on Borsa İstanbul (BIST) by integrating the Trade-off Theory and the Pecking Order Theory. Using annual panel data covering the period 2013–2023, the study examines how firm-specific characteristics and macroeconomic factors influence corporate liquidity decisions in an R&D-intensive sector. The empirical analysis is conducted using a random-effects panel model estimated with Driscoll–Kraay standard errors to account for heteroskedasticity, autocorrelation, and cross-sectional dependence. The robustness of the findings is further assessed through firm fixed-effects, firm-and-year fixed-effects, one-year lagged specifications, and an interaction analysis. The results show that profitability is the most important determinant of corporate cash holdings, providing strong support for the Pecking Order Theory, whereas financial leverage exhibits a weak negative effect. In contrast, firm size, liquidity needs, R&D expenditures, dividend payments, GDP growth, and interest rates do not have statistically significant direct effects on cash holdings, while inflation exhibits weak evidence of a negative relationship. Moreover, the interaction analysis reveals that interest rates positively moderate the relationship between R&D expenditures and corporate cash holdings, indicating that innovation-oriented technology firms tend to retain larger cash reserves under tighter monetary conditions. The findings highlight that macroeconomic conditions influence corporate cash holdings not only directly but also through their interaction with firm-specific characteristics. The study contributes to the corporate finance literature by providing new evidence from an emerging market and offers practical implications for corporate managers and policymakers in designing effective corporate liquidity management strategies under changing monetary conditions.