Cash Holding and CEO Characteristics in Latin American SMEs: Evidence From Chile

This study examines whether CEO characteristics influence corporate cash holding in financially constrained SMEs, a context where cash decisions may reflect funding frictions rather than managerial discretion. Using a panel dataset of Chilean SMEs and applying fixed effects and dynamic generalised method of moments (GMM) with selection corrections, we analysed the combined role of corporate finance and management characteristics. The results show that cash holdings are primarily explained by financial factors- growth opportunities and net working capital- consistent with precautionary motives. The CEO’s age has no systematic effects, and gender effects appear only after correcting for selection bias and only in a specific sector. These findings indicate that, in SMEs, cash holdings are mainly driven by financial constraints rather than managerial traits. The study contributes to behavioural corporate finance and upper echelons theory by showing that managerial characteristics operate as a boundary condition: their influence weakens when firms face structural funding restrictions.