The Effect of Firm-level Factors on the Practice of Cash Management in Small-scale Housing Companies

Abstract

This paper examines the impact of firm-level factors on cash management among small-scale housing companies. Firstly, the study explores the relationship between housing developers and their suppliers and bankers in managing cash. Then, the effect of technology on the cash management is examined. The findings of this study provide mixed evidence of the effects of external factors on the practice of cash management. It is revealed that housing developers in Malaysia generally attempt to minimize external borrowings from banks in order to minimize financing costs. Companies that have strong relationship with their suppliers are associated with low effectiveness in cash management, while those that use a computerized system are found to be more effective than those using the manual system. The study suggests that a study which focuses on the issues and nature of bankers-suppliers relationships be undertaken to further understand the characteristics and uniqueness of this critical industry.