The Impact of Financial Reporting Quality on the Level of Cash Holdings: The Moderating Role of Firm Size - An Applied Study on Companies Listed on the Egyptian Stock Market

The research aims to examine the impact of financial reporting quality on the level of cash holdings, with firm size as a moderating variable in this relationship. The study utilized a sample of 55 companies listed on the Egyptian Stock Exchange during the period 2019–2022. The researcher employed three measures of financial reporting quality: earnings quality, unconditional conservatism, and the comparability of financial statements. Using multiple regression analysis, the study found a positive and significant relationship between earnings quality and cash holdings, leading to the acceptance of the first sub-hypothesis. Additionally, the study concluded a positive and significant relationship between unconditional conservatism and cash holdings, resulting in the acceptance of the second sub-hypothesis. However, the study found a negative but insignificant relationship between comparability and cash holdings, leading to the rejection of the third sub-hypothesis. Thus, the first main hypothesis, which posits that financial reporting quality affects the level of cash holdings, was partially accepted.
The research also revealed insignificant impact of firm size on the relationship between financial reporting quality (measured by earnings quality and comparability) and cash holdings. Therefore, the differences in firm size do not lead to variations in the effect of financial reporting quality on cash holdings, resulting in the rejection of the first and third sub-hypotheses of the second main hypothesis. Finally, the study found a significant impact of firm size on the relationship between financial reporting quality (measured by unconditional conservatism) and cash holdings. This indicates that variations in firm size led to differences in the effect of financial reporting quality on cash holdings, leading to the acceptance of the second sub-hypothesis of the second main hypothesis. Consequently, the second main hypothesis, which posits that the impact of financial reporting quality on cash holdings varies with firm size, was partially accepted.