The Empirical Impact of Social Investment on the Corporate Cash Holdings of South African Financial Institutions

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Abstract
This study examined the effect of social investment on corporate cash holdings in South African financial institutions, addressing a gap in the existing literature, which has largely concentrated on developed countries and non-financial industries. The research provides empirical data on the association between social investment and corporate cash reserves within an emerging-market financial sector. A quantitative, positivist, and deductive research design was adopted, using secondary data collected from 18 South African financial institutions for the period spanning 2015 to 2024. The data were obtained from the Thomson Reuters Eikon and World Bank databases, and the analysis employed the system Generalized Method of Moments (GMM) estimator to control for dynamic connections and potential endogeneity issues. The findings showed a highly significant negative connection between social investment and corporate cash reserves, indicating that firms holding larger cash reserves tend to allocate fewer resources to social investment activities. The results also revealed a strong inverse connection between social investment and cash holdings, suggesting that firms with higher cash balances invest less in social initiatives. These findings indicate a misalignment between the goals of corporate social responsibility programmes and liquidity management strategies in South African financial institutions. The study emphasizes the importance of incorporating social investment into corporate cash holding policies and recommends that managers direct cash reserves towards socially beneficial initiatives rather than maintaining excessive cash balances. By offering data from an emerging-market setting, the study contributes to the fields of sustainability and corporate finance and provides valuable insights for managers making financial and cash reserves decisions that enhance stakeholder value.

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