Abstract
Changes in government policies affect the stock market volatility and the level of cash holdings of corporations, and companies adopt their accounting practices according to government policies. Liquidity is strategically important because it can affect the firm's ability to maintain liquidity and realize investment opportunities. The purpose of the present study is to investigate the effect of expansionary and contractionary policies in the monetary and fiscal domains of the government as an exogenous factor and also the uncertainty in the selection of management methods by the management as an endogenous factor on cash holding. For this purpose, the data of 81 production companies listed on Tehran Stock Exchange and Tehran Stock Exchange during 2008-2009 are examined and tested using combined data. The results show that compliance of tax policies, commodity inventory and corporate revaluation policies and governments' monetary contractionary economic policies are effective in reducing uncertainty in cash holding. In addition, compliance with corporate financing policies and contractual fiscal policies of governments are effective in reducing uncertainty in cash holding.
