Cash holdings in start-ups: The role of founder sociodemographic characteristics

Abstract In this study, we examine the determinants of excess cash holdings on start-ups paying particular attention to the role of the sociodemographic and educational characteristics of the founder. Using a mandatory database that combines firm-level financial data with the founder’s data, we find that founder characteristics provide predictive power in explaining excess cash holdings. Male founders who are older and foreign tend to hold more cash. Additionally, we find that start-ups with greater investment opportunities hold less cash. As expected, excess cash holdings decrease with size and availability of liquid-asset substitutes, and leverage – particularly short-term debt –increases the need for cash. Results are robust to mixed methods (Ordinary Least Squares and Fuzzy-set Qualitative Comparative Analysis) and reflect asymmetric configurations related to the demographic and educational characteristics of the founder.