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The paper examines how economic policy uncertainty and financial development affect a firm's cash-holding policy before and after the global financial crisis. Using Chinese nonfinancial firm data from 1997 to 2018, we obtain three main findings. First, economic policy uncertainty increases corporate cash holdings and its sensitivity to operating cash flows. Second, financial institution and market developments reduce corporate cash-holdings' cash flow sensitivity. Third, the impact of economic policy uncertainty on corporate cash-holdings' sensitivity to operating cash flows decreases with financial development. Firms adjust their cash-holding policy in response to changes in economic policy uncertainty and financial development, indicating that macroeconomic factors determine the precautionary motive for holding cash. [ABSTRACT FROM AUTHOR]

This study examines the impact of institutional investors' site visits (SVs) on corporate cash holdings by using a unique dataset of SVs in China during the period of 2012–2019. We find that SVs significantly increase the level of cash holdings, and the result remains robust after addressing endogeneity concerns and selection bias. The positive impact of SVs on cash holding is more pronounced if a firm has a lower information quality, confirming that SVs facilitate information distribution between managers and investors and thus allowing more cash holding. Further analyses show that firms rely greatly on equity issues and internal cash flows for cash savings, and SVs increase the value of cash for shareholders. Collectively, our findings suggest a new effect of institutional investors' site visits. [ABSTRACT FROM AUTHOR]

Should firms decrease or increase their debt capacity after professional CEO succession? Examining a sample of all publicly traded firms from 1991 to 2016 in Taiwan, this research finds that firms with professional CEO successors tend to raise less debt and consider the succession of professional managers to be more conservative because they are afraid of being monitored more severely. From the perspectives of firms' characteristics, those with professional CEO successors and high cash holdings and investment levels are more likely to increase their debt capacity, while those of a larger size and higher post-succession profitability volatility decrease their ability at raising debt. Finally, we hand-collect data and develop a novel method to identify the real founders and reconfirm our empirical evidence. Our findings present financial implications for boards of directors which they can evaluate firms' cash holdings, investment level, firm size, and profit volatility before deciding on whether to name a CEO successor to take over their firms. [ABSTRACT FROM AUTHOR]

This study examines not only the relationship between a firm's excess cash holdings and audit effort but also the moderating effects of CEO characteristics on the relationship. Using a sample of non-financial listed Korean companies for 2000–2014, we find that excess cash holdings have a significant positive effect on the external audit effort in terms of audit fees and audit hours. In addition, we find that the effect of excess cash holdings on audit effort is stronger when: (1) the CEO is a non-owner manager, (2) the company belongs to a conglomerate business group and (3) the CEO is in the earlier years of her or his tenure. [ABSTRACT FROM AUTHOR]

Agency cost theory suggests that a firm's financial leverage is important to improve organizational efficiency. Using data of industrial companies of three biggest economies, this study analyzes how debt-financing decision affects firm efficiency and the mediating role of cash holding. We find inverted U-shape relationship between the level of financial leverage and firm efficiency. This implies that firms with optimum capital structure achieve high efficiency. The cash-holding level of the companies negatively relates to the efficiency. We also document that the firms' that apply more financial leverage are less likely to hold excess cash balances and that the cash holding partially mediates the relationship between the financial leverage and the firms' efficiency. This suggests that the use of debt financing has the potential to enhance firm efficiency by effectively tapping the free cash flow that would have been misused by the management. The results have important implications for corporate finance since it highlights how financial decisions determine corporate productivity. [ABSTRACT FROM AUTHOR]

We study the dynamic evolution of Chinese firms' cash holdings and their relationship with R&D investment using a sample of companies listed in the Chinese A-share market. After introducing the exogenous events of the 2008 financial crisis and China's 'four trillion yuan' monetary stimulus plan (2008–2010), we analyse the dynamic evolution of the relationship between firms' cash holdings and R&D investment in the development of external financing facilitation channel effects from the perspective of two typical financing facilitation channels, namely bank relationship and equity state-ownership. The main findings are as follows: (1) Firms with higher R&D investments tend to hold more cash reserves. This positive correlation is affected by the economic and monetary conditions, which are changing constantly. The sensitivity of cash holdings to R&D investment plays a crucial role in explaining the dynamic evolution of Chinese firms' cash holdings. (2) During the 2008 financial crisis, bank relationship and equity state-ownership significantly mitigated the positive relationship between firms' cash holdings and R&D investments, which means that external financing facilitation channels had greater and more significant effects. Moreover, those effects decreased after the completion of the 'four trillion yuan' monetary stimulus plan. [ABSTRACT FROM AUTHOR]

While substantial evidence is emerging internationally on higher risk aversion among women than among men, there is less evidence on women's business choices. We explore some of the reasons for the relationship between gender diversity and cash holdings. Specifically, this paper focuses on the choices involving the stock of cash held by firms in which women have executive roles and can consequently exert a crucial influence on the firms themselves. We estimate our proposed empirical models using a dataset of 12,466 observations from 18 European countries. We find a positive relationship between the presence of women with executive roles in the firm and cash holdings. Women tend to make more conservative choices probably because they are more risk averse than men are. This propensity has a relevant impact on the financial choices of firms when women play a leading role. Notably, the study demonstrates that the institutional environment and industry differences moderate our baseline relationship. [ABSTRACT FROM AUTHOR]

We find that the cash flow sensitivity of cash holdings of firms whose investment opportunities are lower is significantly higher by examining a panel data of 898 Korean firms for 1999-2014. The cash flow sensitivity of investment is also found to be lower in case of low investment opportunity. Both findings suggest that firms decide to hold cash in response to an increase in cash flow when they do not have a good investment opportunity. Precautionary motive because of financial constraints and uncertainty, and agency problems, however, are not associated with the cash flow sensitivity of cash holdings. These findings imply that it is necessary to develop new investment opportunities to encourage firms to spend more cash in Korea. [ABSTRACT FROM AUTHOR]

This article analyses the determinants of cash holding and dividends and the relation existing between them in the institutional framework of Brazil, an emerging market on the world scenario. It also presents specific cultural and institutional characteristics. Through the panel data methodology, we show how peculiar the behaviour of Brazilian firms is, surprisingly quite different from the traditional theories and stereotypes. It was found that they have lower cash holdings and pay higher dividends compared to the UK market. In addition, analysis of the relation between these two policies showed a positive relation, together with other closely related items such as the relevant effect of profitability and investment opportunities. All this leads us to confirm the importance of the institutional framework in the financial decisions taken in the Brazilian market. [ABSTRACT FROM PUBLISHER]

The trade-off theory of corporate cash holdings predicts that there is an optimal level of cash. We test the trade-off theory by investigating the relation between deviations from optimal cash holdings and the valuation of cash from a shareholder’s perspective. We decompose corporate cash holdings into the optimal level of cash and the deviations from the optimum. We find that the marginal value of cash for shareholders is higher when a change in cash moves corporate cash holdings towards the optimal level and that this relationship holds for both the above-optimal deviations and the below-optimal deviations. We conclude that the results are consistent with the prediction of the trade-off theory of corporate cash holdings. [ABSTRACT FROM PUBLISHER]

This study examines the cash flow sensitivity of external financing (financial flexibility (FF)) of firms from the perspective of the agency by focusing on whether and how insider ownership has a modifying effect on the FF of firms. Given the documented relationship between corporate governance and cost of external financing, insider ownership, an important proxy of corporate governance, should affect FF via the agency cost channel. A review of the US nonfinancial firms from 1992 to 2009 indicates that insider ownership aids in determining the FF of firms. More specifically, results indicate the existence of optimal insider ownership, and any deviation from it causes FF to decrease. In addition, FF is higher when CEO ownership is lower (<0.08%) and this phenomenon is more pronounced for financially unconstrained firms. Furthermore, FF is higher when non-CEO insider ownership is in the middle range (0.12–0.43%) for financially constrained firms, whereas non-CEO insider ownership has minimal impact on FF for unconstrained firms. [ABSTRACT FROM PUBLISHER]

A correction to the article "Cross institutional cash and dividend policies: focusing on Brazilian firms," which was published in the same issue, is presented.