Recently, the accounting literature has shown the important role of the quality of
accounting information in reducing asymmetries between firms and investors.
Therefore, the purpose of the present research is to contribute to the financial
literature examining the effect of accounting quality on corporate cash holdings,
given that there is no previous direct evidence on this important issue. We used
accruals quality as a proxy for accounting quality and tested our hypotheses in
a panel data sample of Spanish firms for the period 1995–2001. To control for
unobservable heterogeneity and for potential endogeneity problems, we used
GMM methods of estimation