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Exports at firm level improve the financial performance and contribute to economic growth. Exporting activities can require additional financing and pose a challenge to manufacturing firms, affecting their managerial financing decisions. This study explores the impact of export intensity on leverage using a dataset of manufacturing firms. The results of two-step system GMM reveal that export intensity has a negative influence on leverage. We find that a firm size positively impacts leverage, while cash holding has a negative connection with leverage. Finally, we note that board size exhibits a positive relationship with leverage. These findings suggest important policy implications for export promotion, specifically for a small open economy. The results are robust to different sensitivity checks. [ABSTRACT FROM AUTHOR]

In the age of Post COVID Resilience and Digitization, strategic issues in leadership research have gained prominence. Succession planning is one of such topics of strategic Human Resource Management (SHRM) which is considered by corporate boards as a major concern as it provides a way for business continuity. It is quite an important aspect for most of the start-up enterprises of modern times as they have to ensure its business continuity through the availability of strong leadership bench strength. Having a good successor on key management positions will ensure a family legacy for upcoming generations. Past literature offers insight that corporate firms including family and standalone groups have observed many challenges in terms of loss of leadership on key management positions due to the lack of a proper succession plan in place. In this study, it has attempted to explore various insights related to succession planning and its linkages to executive compensation in corporate firms having diversified business portfolios. Findings provide a fresh perspective on succession planning and executive compensation which is equally important for practitioners and new-age start-ups. [ABSTRACT FROM AUTHOR]

Using a hand-collected sample of U.S. multinational firms' foreign and domestic cash holdings, we evaluate the earnings persistence implications of changes in foreign and domestic cash and whether stock prices reflect these implications. Building on the earnings decomposition approach in Dechow, Richardson, and Sloan 2008 Journal of Accounting Research, 46 (3): 537–566, we find that, in the overall sample, changes in foreign cash are as persistent for future earnings as changes in domestic cash. In the cross-section, we find that foreign cash changes have higher persistence when foreign operations offer better growth opportunities and when repatriation taxes are lower. We then examine whether investors correctly price the persistence implications of foreign and domestic cash changes. We find a positive association between current foreign cash changes and one-year-ahead stock returns, suggesting that investors underreact to foreign cash changes or equivalently underestimate the earnings persistence of foreign cash changes. We further document that investors are more likely to misprice foreign cash changes when information processing costs are higher and when firms have poorer information environments. Our study sheds light on a recent paper by Harford, Wang, and Zhang 2017 The Review of Financial Studies 30 (5): 1490–1538, who find that investors discount foreign cash changes, which they attribute to agency costs and investment inefficiencies. Our findings suggest that the discount is more likely due to investor mispricing of foreign cash changes. [ABSTRACT FROM AUTHOR]

Business strategy's impact on firm cash holdings and dividend payouts has largely remained unexplored. We identify a fundamental and direct link between a firm's business strategy and its cash holdings and dividend payouts. Analysing two large samples of data on US firms over the period 1992–2017, we find strong evidence that prospectors (defenders) are likely to hold more (less) cash and pay less (more) dividends than other firms. Further analysis suggests that prospectors pay dividends less frequently than do defenders. The results are robust to a battery of robustness checks and additional analysis. Overall, the results suggest that identifying a firm's business strategy significantly helps to understand a firm's cash holdings and dividend payout decisions. [ABSTRACT FROM AUTHOR]

The rise in firm-level cash asset ratios has become a prominent trend in countries around the world which may further influence the capital allocation efficiency. This study analysed the inefficient effect of cash holdings on the capital allocation by combining the internal capital market theory with principal–agent theory and asymmetric information theory. The theoretical hypotheses were tested using linear panel regression models based on financial data from Chinese listed enterprises. We found that corporations holding more cash assets had lower capital allocation efficiency than those with fewer cash assets, which is consistent with agency theory and asymmetric information theory. Internal capital markets exacerbated this adverse effect. Additional testing was conducted to examine the heterogeneity of this effect between different types of ownership and strategy; the findings showed that an increase in cash holdings had a greater marginal impact on overinvestment among privately owned enterprises and underinvestment among state-owned enterprises. Internal capital market operation alleviated the problem of overinvestment but exacerbated the problem of underinvestment in privately owned enterprises, whereas it increased overinvestment in state-owned enterprises. The results suggested that different types of enterprises should deal with the inefficient effect of cash assets based on the causes of inefficient investment. [ABSTRACT FROM AUTHOR]

This study examines the relationship between institutional fragility and corporate cash holdings. Using data from China between 2004 and 2017, we find that institutional fragility is associated with increased corporate cash holdings. The relationship is stronger for non-state-owned enterprises and stronger when firms have no relationship with banks. Furthermore, we find that institutional fragility reduces current investment opportunities, leading to an increase in corporate cash holdings. Investment opportunities play an intermediary effect; hence, institutional fragility affects corporate cash holdings. [ABSTRACT FROM AUTHOR]

This paper analyzes the impact of economic policy uncertainty on firm performance. Utilizing a news-based index of economic policy uncertainty and firm-level data in China, firm investment, employment, and revenue are found to be negatively associated with policy-related economic uncertainty. This negative relationship is weakened in state-owned enterprises (a fall in investment of 5.61%, employment growth of 0.09%, and sales growth of 0.31%) compared to that of non-state-owned enterprises (a fall in investment of 7.79%, employment growth of 0.14%, and sales growth of 0.34%). We explore several potential explanations and find evidence supporting that economic policy uncertainty reduces the incentives of firms to expand their operation through the mechanism of risk-taking, cash holdings and tax burden. Given this microscopic study on mechanisms, our analysis provides a reference for policy-makers to effectively reduce economic fluctuations. [ABSTRACT FROM AUTHOR]

Using a sample of 11,365 unique US firms over the period 1966 to 2021, this study examines the relationship between the age of a firm and its cash holdings. We categorize firms as young, mature, or old based on their age or years of operation. Our results show that firm age is one of the important determinants of cash holdings and that managers adjust cash holdings in response to changing financial needs and risks as firms age. We find that young firms tend to hold higher levels of cash than more established firms and that the marginal value of cash holdings is higher for younger firms. This is consistent with the notion that young firms are more focused on growth and investment and may have limited access to external financial resources. In contrast, mature and old firms tend to hold lower cash levels, possibly due to greater financial stability, increased creditworthiness, and a lower need to manage financial risks. Controlling for significant variables, we confirm our findings with the robustness tests. Taking care of the endogeneity issue, we still can confirm that firm age is negatively significant to the level and the marginal value of cash holdings. [ABSTRACT FROM AUTHOR]

This paper examines the effect of labor unemployment risk on firm risk. Using unemployment insurance benefits as a proxy for unemployment risk, we find an economically significant positive relation between unemployment risk and firm risk. This positive relation is more pronounced for firms that are more labor‐intensive, have a higher layoff propensity and are more financially constrained. While existing literature that employs corporate policy measures such as debt and cash holdings suggests an opposite relationship, our paper presents evidence that the effects stemming from earnings management, earnings quality and reporting quality appear to dominate. [ABSTRACT FROM AUTHOR]

We examine the impact on corporate cash holdings of international merger and acquisition (M&A) laws, which facilitate corporate takeovers. We use the staggered enactment of M&A laws from 1992 to 2005 and a sample spanning 34 jurisdictions, and find that levels of corporate cash holdings increase after passage of M&A laws. We also find that firms with better operating performance, higher earnings volatility, higher P/E ratio, and in jurisdictions with high M&A intensity hoard more cash after the enactment of M&A laws. These firms decrease dividends and capital expenditure and increase cash‐based acquisitions in the post‐M&A law period. Additional analysis shows that the effect is manifested in the subsample of firms in jurisdictions with better institutional environments. Lastly, we find that investor valuations of cash holdings decrease after the enactment of M&A laws. Collectively, our results suggest that managers hoard cash to finance M&A activities after the enactment of M&A laws, driven by the motive of empire‐building, and that cash hoarding behaviors are viewed by investors as value‐decreasing. [ABSTRACT FROM AUTHOR]

The previous literature on capital structure has produced plenty of potential determinants of leverage over the last decades. However, their research models usually cover only a restricted number of explanatory variables, and many suffer from omitted variable bias. This study contributes to the literature by advocating a sound approach to selecting the control variables for empirical capital structure studies. We applied linear LASSO inference approaches to evaluate the marginal contributions of three proposed determinants; cash holdings, non‐debt tax shield, and current ratio. While some studies did not use these variables in their models, others obtained contradictory results. Our findings have revealed that cash holdings, current ratio, and non‐debt tax shield are crucial factors that substantially affect the leverage decisions of firms and should be controlled in empirical capital structure studies. [ABSTRACT FROM AUTHOR]

Buddhism and Taoism have been deeply rooted in China for generations and both of them have a profound impact on the local culture and social norms. By employing 23,999 firm‐year observations between 2008 and 2018, we examine how local religious norms affect corporate cash policies. We provide strong evidence that religiosity significantly reduces the level of corporate cash holdings, by mitigating financial constraints and earnings management of the listed companies. Managers from religious areas make more effective investments and distribute more dividends. Furthermore, our findings document that religion has a more pronounced influence on cash holdings amongst the firms with the smaller size, lower leverage, higher marketization, effective internal control and facing fierce market competition. Overall, Buddhism and Taoism, constituting the main religious norms in China, significantly optimize the firms' cash holdings and firm value. [ABSTRACT FROM AUTHOR]

This paper provides new evidence on how both governance bundles and directors' social capital together can help to determine cash holdings for foreign cross‐listed firms. Using a large cross‐country sample of 1677 publicly listed firms from 32 countries during the period of 2004–2015, we find a positive relationship between governance bundles and cash holdings for foreign cross‐listed firms with higher directors' social capital. We address potential issue of endogeneity. Therefore, our findings are robust to alternative model specifications and instrumentations and alternative measure of social capital. The findings of our study contribute to the inconclusive decision in the academic literature related to cash holdings, governance bundles, and directors' social capital, especially related to the foreign cross‐listed firms. In addition, the findings can assist the stakeholders of foreign cross‐listed firms to understand the intention of the firms' cash holdings and allow policy makers to identify the need of modification for governance structure by controlling the opportunistic behaviour of the firm manager. [ABSTRACT FROM AUTHOR]

In this paper, we show that the churning generated by listing and delisting is a key mechanism for disseminating new financial norms regarding cash and debt among listed nonfinancial firms in the U.S. after 1980. Over this period, cash holdings have grown markedly across the distribution of listed U.S. nonfinancial corporations, while indebtedness has fallen in less indebted firms. Surprisingly, these trends are particularly dramatic among the most financially fragile listed firms, which generate insufficient cash flows to service their financial obligations (what Minsky terms 'Ponzi' firms). In this paper, we use quantile decompositions to show that these long-term trends in cash and debt are driven by churning among listed firms during the 1980s and 1990s, when listing and delisting rates are high. The reason is that firms list with more cash and less debt, and delist with less cash and more debt, than continuing firms. This mechanism is particularly strong among listed Ponzi firms. Our results highlight the importance of institutional changes surrounding access to equity finance and Initial Public Offerings, rather than changing behavior within continuing firms, for trends in listed firms' financing behavior since 1980. [ABSTRACT FROM AUTHOR]

Do political beliefs matter for corporate cash-holding behavior? In this paper, we analyze whether the political preferences of managers affect their cash holdings. Using a composite political index to measure corporate political culture, we find that firms with Republican-leaning managers hold significantly less cash than firms managed by Democrats. We attribute the lower-level cash holdings of Republican firms to more conservative corporate policies, indicated by lower risk exposure, lower R&D expenditure, lower capital investment, and higher profitability. Our results survive various robustness tests, such as state-fixed effects and IV tests. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine whether geopolitical risk (GPR) impacts the cash holdings behavior of 210 Turkish firms between 2005 and 2019. The authors choose Turkey as a country of interest because Turkey has an important place in terms of geographical location and serves as a bridge between Europe and Asia. Considering the prominent role that can play in decision-making processes, the authors thought that analyzing the impact of GPR on the cash holdings determinants of Turkish firms would be important and interesting. A widely accepted view is that GPRs play an important role in the economic decisions of emerging countries, such as Turkey. Design/methodology/approach: The authors examine models with fixed effects (FE), random effects (RE) and pooled ordinary least squares (POLS), respectively. First, the authors analyzed whether POLS, FE or RE would be the most appropriate model. According to the F-test and the Breusch–Pagan LM test, the FE and the RE models are more suitable than POLS. Then, according to the Hausman test results, the authors found that FE is this study's most appropriate model. After determining the validity of FE, the diagnostics tests of heteroscedasticity, autocorrelation and serial correlation tests are examined. Due to the presence of these problems, Driscoll and Kraay's (1998) test, which is the robust standard error estimator, is used. Findings: The authors find a positive relationship between GPR and cash holdings after controlling firm-level control variables. Firms faced with uncertainty prefer to hoard cash as a precautionary measure. In keeping with real options theory, firms postpone the investments of firms under uncertain conditions. The use of alternative measurements for GPR and cash holdings ensures the validity of our results. The authors' research reveals that investors and politicians should pay more attention to the influence of GPR on the determinants of the cash holdings of firms. Research limitations/implications: There are limitations for this study, but this study may provide opportunities for further studies. First, this study has only data from Turkey. This situation mitigates cross-country effects. In future studies, the number of firms, countries of focus and time span can be expanded. Second, this study does not consider the period of coronavirus disease 2019 (COVID-19) that increased risk and uncertainty worldwide. Further studies may consider the impact of COVID-19 and geographical risks relating to cash holdings. Third, the authors try to choose more relied independent and control variables. Practical implications: The authors' results provide some insights that are relevant to practitioners and policymakers. Managers need to consider GPR in managers' financial decisions based on managers' firm-specific characteristics. Turkish policymakers should target improving policies to alleviate the negative effects of GPRs. Regulators should postulate more encouraging policies to firms in an environment of GPR. Regulators can give firms more time to understand and analyze the GPRs and the impacts of GPRs to adjust regulators' day-to-day activities. Originality/value: There are fewer studies in the literature that analyzed the relationship between GPR and cash holdings. This study aims to full this gap in the literature. [ABSTRACT FROM AUTHOR]

This paper examines the impact of judicial system reform on trade credit financing using a quasi‐natural experiment in China. We find that the judicial system reform promotes the trade credit financing. The reform effect is stronger for firms that are non‐state‐owned, advocating trust culture orientation, and with high relationship‐specific investment level, high debt level, and low cash holdings level. Moreover, our results show that the increase in business transaction volume and the improvement of internal control quality are important channels to increase the trade credit financing. The judicial system reform has notably improved the total factor productivity and firm value. [ABSTRACT FROM AUTHOR]

This study examines the determinants of firms' requests for Private Letter Rulings (PLRs) from the US Internal Revenue Service (IRS) and their impact on firms' cash holdings. Our results show that PLR requests tend to be made by firms with more active tax planning, more acquisitions, higher analyst following, higher leverage, and less in‐house tax expertise. We also show that firms with IRS audit red flags are less likely to request a PLR. We use a difference‐in‐difference approach to assess changes in cash holdings following PLR requests and report a decrease in cash holdings for PLR firms, consistent with the notion that PLRs act to reduce tax uncertainty. Our study provides the first empirical evidence about the determinants of PLR requests and complements prior work on tax uncertainty and cash holdings (Hanlon, Maydew and Saavedra, 2017). [ABSTRACT FROM AUTHOR]

By proxying 'awe culture' (i.e., reverence for life and ethical behaviour) with regional induced abortion rates, we examine the impact of awe culture on corporate social responsibility (CSR) in a sample of Chinese firms. We find that firms located in areas with higher induced abortion rates spend less funds on CSR activities and obtain lower CSR scores. The findings remain intact after an array of robustness tests. Further analysis shows that the effect of awe culture on CSR is more pronounced in areas with weaker law enforcement and where the local government emphasises economic growth targets. However, the effect becomes insignificant when firms are well‐represented by top executives with overseas experience, foreign directors, and a high proportion of female board members. The significance of the effect also diminishes for non‐state‐owned firms, and firms with higher institutional ownership and higher cash holdings. Moreover, the lack of awe culture attenuates the positive impact of CSR on firm value. Overall, we document that awe culture, as an informal institution, shapes CSR behaviours. [ABSTRACT FROM AUTHOR]

In the presence of agency costs, managers retain cash for their own benefit at the expense of shareholder wealth. Extending prior literature on the role of corporate governance in mitigating the effects of agency conflicts on corporate cash holdings, we study a governance mechanism that has largely been overlooked, namely, corporate codes of ethics. We find a negative association between code of ethics quality and cash holdings, which suggests that managers hold less cash when the firm has a strong code of ethics in place. The effect is greater when agency costs are elevated due to weaker country‐level investor protections. We also find that payouts and the marginal value of cash holdings to investors are increasing in code quality. Overall, our results are consistent with codes of ethics helping to limit opportunistic behaviour from managers when determining the firm's level of cash holdings. [ABSTRACT FROM AUTHOR]

Corporate excess savings, or gross savings in excess of fixed capital formation, can affect the real economy through the financial decisions of individual firms. Based on an unbalanced panel of more than 2,000 Korean listed companies from 2003 to 2021, this study analyses how excess savings are used in individual firms' financial activities and their consequent impact on aggregate demand at the macroeconomic level. Excess savings are most often used for debt repayment. Considering heterogeneity, the excess savings of large firms are mainly related to M&A, while the excess savings of small firms are relatively more disbursed to cash holdings for the precautionary motive. Since 2010, the extent of its use in M&A has become stronger; M&A in large firms appears to crowd out fixed capital formation for a certain period of time. When this analysis is applied at the industry level, it is also consistent with the results of individual firms. [ABSTRACT FROM AUTHOR]

Does CSR reflect the "self-interest tool" of management or the "value tool" of shareholders? This paper seeks to examine the impact of CSR on corporate cash holdings in China's stock markets. This paper presents evidence that CSR significantly increases corporate cash holdings, and our findings remain consistent after a series of robustness tests. Mechanism analysis shows that CSR mainly affects cash holding by optimizing corporate governance, which is reflected in that CSR improves the efficiency of investment and increases dividend and R&D investment. Furthermore, CSR has a spillover effect and value enhancement effect that can improve cash holdings at the industry level and also enhance corporate market value. [ABSTRACT FROM AUTHOR]

With the outbreak of the Russia-Ukraine conflict, combined with the COVID-19 epidemic and the Federal Reserve's interest rate hike, geopolitical risks have increased sharply, which has brought great pressure on the sustainable development of natural resources industry. This study aims to discuss the impact of geopolitical risk (GPR) on corporate excess cash holdings in China's natural resources industry. The findings suggest that GRP can encourage enterprises in the natural resources industry to hold more excess cash. The findings still hold with a suite of robustness tests. The study also evidences that the above effect is more significant for state-owned enterprises, enterprises in the mining industry, and large-scale enterprises. Finally, further results show that with the increase of GPR, enterprises with strong risk-taking capacity tend to hold more excess cash, while enterprises registered in higher market-oriented regions are inclined to retain less excess cash. These findings can conduce to a deep understanding of the influence of GPR on corporate excess cash holdings and serve as a reference for policy-makers to adjust policies. [ABSTRACT FROM AUTHOR]

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 role of financial factors contributing to firms' resilience during the Russia-Ukraine war. Event study results show a significant adverse reaction, which started before the official war announcement and grew over time. Further, cross-sectional analyses uncover that the negative effect is mitigated for larger and more profitable firms but amplified for high market-cap firms with high cash and debt-holding; both effects are more pronounced for non-financial companies. This study contributes by exploring Turkey as a unique emerging market setting due to its significant geopolitical position, strategic trade, and business partnership with the European Union and Russia. [ABSTRACT FROM AUTHOR]

The present study aims to explore the effect of equity incentive intensity on defensive behavior in enterprise cash holding decision-making using ordinary least squares, System GMM, and Heckman tests. This study finds that the higher the intensity of equity incentives, the lower the level of corporate excess cash holdings. The intensity of equity incentives inhibits defensive behavior in corporate cash holding decisions. A substitute relationship is observed between equity incentive intensity and product market competition in the inhibition of management defensive behavior in cash holding decision. Our further research finds that the inhibitory effect of equity incentive intensity on the defensive behavior of cash holding decisions mainly exists in the case of ineffective supervision by large shareholders and creditors. For theoretical contribution, this paper tries to explore the governance effect of equity incentive on the management defensive behavior in a company's cash holding decision making. It also reveals the substitute relationship between the intensity of equity incentive and the product market competition in suppressing the management defensive behavior in the cash holding decision of enterprises. Moreover, it provides new evidence for the governance effect of equity incentive in the institutional environment and expands the literature on equity incentive effects. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this study is to examine the impact of board attributes and managerial ownership on cash holdings. Design/methodology/approach: The present study examines a sample of 70 listed firms in Saudi Arabia observed during the period stretching from 2006 to 2016. To test the hypotheses, the authors used generalized method of moments and quantile regressions. Findings: The empirical results reveal that corporate governance (CG) mechanisms are inefficient in the Saudi context. In fact, the authors found that board size, board independence, duality and managerial ownership impact positively and significantly cash holdings. Additionally, quantile regressions confirm the results that at certain thresholds, CG mechanisms are not efficient in protecting shareholders' interests. Shariah compliance is found to moderate negatively and significantly the studied relationship. Originality/value: This study helps to not only clarify and help decision-makers to see the importance of corporate cash management but also to identify the limits of the CG mechanisms put in place. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine the influence of board gender diversity on dividend policy and cash holdings in several emerging economies. This study also investigates the nonlinear impact of women on dividend policy and cash holdings and the differences between countries with one- and two-tier board systems. Design/methodology/approach: The sample includes 103 firms listed in the Association of South East Asian Nations (ASEAN) countries of Indonesia, Malaysia, the Philippines and Thailand. The data represent all industries except the financial industry. The sample period is the 10 financial years from 2010 to 2019. This study analyzed unbalanced panel data with fixed effect specifications for baseline model analysis. Findings: This study finds robust evidence indicating that women's presence negatively influences dividends and positively influences cash holdings. The findings in the additional analysis are significant and show a nonlinear relationship, supporting the substitution hypothesis. Practical implications: The findings of this paper certainly provided a valuable contribution as a useful empirical guide for policy decision-makers in developing countries, regulators and corporate decision-makers related to board gender diversity. Developed countries have implemented a minimum quota of women boards in the composition of the board of directors. However, there are still few developing countries that implement these policies. Women can reflect or show their values in corporate governance, such as being careful in making decisions and being conservative about risk. These guides policymakers in implementing a minimum quota of women in the composition of the board of directors. Originality/value: This study contributes to the debate on the impact of gender diversity on dividends and cash holdings, especially in ASEAN emerging economies because there is a notable empirical gap relative to developed countries. Moreover, this study contributes to the necessary nuanced understanding of the substitution hypothesis in emerging economies. The results also support the explanation of critical mass theory to account for the nonlinear relationship between the number of women board members and dividends and cash holdings. [ABSTRACT FROM AUTHOR]

Purpose: This study examines the impact of firm financial performance, free cash flow, and cash holding on the overinvestment of manufacturing companies listed on the Indonesia Stock Exchange in 2017-2021. Methodology: We employed 315 manufacturing companies listed on the Indonesia Stock Exchange for the 2017-2021 period as samples. The data required is correlated to financial performance, free cash flow, cash holding, and company overinvestment. Data is input manually from the financial reports obtained from the website of each firm. To examine the hypothesis, this study applied multiple regression analysis methods. Findings: The results show that free cash flow has a significant and negative effect on overinvestment. It illustrates that higher free cash flow does not encourage a manager to overinvestment. This result support hypothesis 1 (H1). Cash holding affects overinvestment positively and significantly. These results indicate that higher cash holdings inspire managers to overinvestment. These results support hypothesis 2 (H2). Firm performance influences overinvestment negatively and significantly. This result indicates that higher firm performance does not motivate a manager to overinvestment. These results support hypothesis 3 (H3). Originality/Value: Difference from the previous study, this study examines the impact of financial performance, free cash flow, and cash holding on overinvestment in one comprehensive model. [ABSTRACT FROM AUTHOR]

The increase in cash holdings held by non-financial corporations in emerging economies in general, and Latin American in particular, has received less attention vis-à-vis their advanced economies' peers. Considering that cash holdings contain not only cash but also short-term, interest-bearing assets, we test whether the pursuit of financial revenues was one motive behind the decision to hold this type of asset as it is claimed in analyses of corporate financialization. We use a panel of listed non-financial firms from Argentina, Brazil, Chile, Mexico, and Peru between 1998 and 2018 to test this hypothesis. Although we find supporting statistical evidence in favor of this relation, this is mostly explained by Brazil and results point towards a low economic significance. [ABSTRACT FROM AUTHOR]

We study whether pension fund board governance relates to asset allocation. Pension funds with well-governed boards have greater international diversification, lower cash holdings, and, when pension funds are small, invest more in risky assets. In particular, pension fund boards that establish comprehensive investment policies invest more in equities, in foreign assets, and hold less cash. We argue that a comprehensive investment policy is likely to serve as a proxy for the financial expertise available to the fund while it provides the set up to facilitate decision making. Finally, we further show that the presence of external financial experts is also associated with lower cash holdings. [ABSTRACT FROM AUTHOR]

The exogenous shock of the COVID-19 pandemic disrupted the equity market worldwide; however, the extent of its impact on the sectoral returns varied. Sectors like aviation, hospitality, and retail were badly affected as a result of the imposed lockdowns. Contrarily, the technology, e-commerce, pharmaceutical, and biotech sectors thrived for the same reasons. The present study evaluates the impact of the disruption of COVID-19 on firms from diverse sectors and examines the moderating effect of firms' financial characteristics on sectoral performance. The study establishes a causal relationship between the firm's cumulative abnormal returns generated during the various phases of the pandemic and their sectoral and financial characteristics using data for 317 firms listed on the National Stock Exchange of India. The results indicate that financial characteristics such as cash holdings, dividends, asset tangibility, and analyst coverage moderate the impact of the COVID-19 pandemic on sectoral performance. Findings provide evidence in support of the role of information asymmetry during economic disruptions. [ABSTRACT FROM AUTHOR]

We investigate the relationship between firms' cash holdings and pandemics. Our results show that compared to tele‐workable firms, whose employees can work remotely, non‐tele‐workable firms with more on‐site employees increase cash during pandemics. This increase in cash comes from short‐debt, preferred stocks, reduction in capital expenditures, discontinuation of some operations and lower tax payments. Firms hold more cash as a reaction to higher default risk. For non‐tele‐workable firms, there is a positive relationship between abnormal stock returns and cash, suggesting that this increase in cash during pandemics is not driven by behavioral reasons but by increases in uncertainty in labor productivity. [ABSTRACT FROM AUTHOR]

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This paper evaluates how the relation between firms' cash holdings and their acquisition decisions changes over macroeconomic cycles using a sample of 47,615 acquisitions from 36 countries between 1997 and 2014. Higher cash holdings and stronger macroeconomic conditions each increase the likelihood that a firm will make an acquisition. However, larger cash holdings decrease the sensitivity of acquisitions to macroeconomic factors, suggesting that cash holdings lower financing constraints during times when the cost of external finance is high. Announcement day abnormal returns for acquirers follow a consistent pattern: They decrease with acquirer cash holdings and with better macroeconomic conditions. [ABSTRACT FROM AUTHOR]

We exploit variation in demand induced by demographics to provide causal evidence of the precautionary motive of cash holdings. We show that firms significantly increase their cash levels in response to exogenous increases in investment opportunities. We also provide novel evidence of the dynamics of accumulation and use of cash. Financially constrained firms build their cash reserves using internal sources. Consequently, they start saving earlier and keep high cash levels longer. Unconstrained firms rely on external financing to both invest and build cash reserves, requiring them to save less and allowing them to incur lower costs of carry. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

We examine the impact of mutual fund dual ownership (i.e., simultaneous holdings of stocks and bonds of the same company by mutual fund families) on corporate innovation. Our findings indicate that dual ownership is positively associated with innovation quantity, quality, generality, and originality. This effect is mainly driven by non-index funds, which are more likely to be active monitors. Consequently, both stocks and bonds held by dual owners tend to generate higher returns, particularly for more significant, groundbreaking innovations. These results suggest that mutual fund dual ownership mitigates conflicts of interest between shareholders and creditors, thereby enhancing innovation and firm value. However, the relation between dual ownership and innovation turns negative during the recent financial crisis, suggesting that shareholder-creditor conflicts culminate in extreme financial distress, exacerbating dual holders' risk aversion, and hence, hindering corporate innovation. [ABSTRACT FROM AUTHOR]

Purpose: This study investigates the impact of managerial ability and auditor report readability on the cost of debt and corporate liquidity in Omani-listed industrial companies. Design/methodology/approach: The study uses data from the S&P Capital IQ database and audited annual reports published on Muscat Securities Market. The sample consists of 35 firms (175 firm-year observations) from 2015 to 2019. Managerial ability is measured using the data envelopment analysis proposed by Demerjian et al. (2012a, b). Auditor report readability is measured as a log of the auditor report digital file size proposed by Loughran and McDonald (2014). Findings: This study finds that a company's managerial ability reduces the cost of debt lending support to upper echelons and agency theory. Highly able managers of industrial companies are associated with increased corporate liquidity consistent with the precautionary motive of holding cash. In addition, less-readable auditor reports contribute to higher debt costs and reduce corporate liquidity. Originality/value: To the best of the authors' knowledge, few studies have explored the influence of managerial ability and auditor reporting readability on firms' financial policy. For industrial-sector firms, this study demonstrates the managerial ability and readability of auditor readability as significant determinants of the cost of debt and corporate liquidity, especially during periods of uncertainty. Thus, the findings can be generalized to other non-financial sector firms in the country and the Middle East. [ABSTRACT FROM AUTHOR]

Using data from 41 countries, we provide novel empirical evidence that firms' cash holdings are positively associated with their climate change exposure. This evidence is robust to different model specifications and survives a battery of tests to ease concerns related to spurious correlation and omitted variable bias. Using the release of the Stern Review as an exogenous shock to climate change awareness, we show that this association becomes significantly stronger after the release of the Review and particularly so for firms with higher exposure to regulatory and transition risk dimensions of climate change as well as financially constrained firms. Overall, results fit consistently within the precautionary motive framework and suggest that firms hold more cash to safeguard against the adverse impact of climate change. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine the association between corporate sustainability commitment and cash holding and whether the board's leadership competency moderates the association. Design/methodology/approach: The sample consisted of Islamic banks in Malaysia from 2017 to 2019. The sustainability commitment was measured based on the dimensions of the economic, social and environment of the Sustainable Development Goals (SDG). Findings: The sustainability commitment of the Islamic banks are low. The regression results are not supportive of the hypotheses on the association between corporate sustainability commitment and cash holding and the moderating effect of board's leadership competency. Research limitations/implications: The Islamic banks in Malaysia are still in their early stages to achieve the SDGs, but the trend of disclosure suggests that they are gradually embracing the commitment to sustainability practices. It is in support of the agency theory, with findings indicating greater agency cost that is perceived upon companies with greater sustainability commitments. Originality/value: This paper integrates the dimensions of the SDG with the value-based intermediation guideline by Bank Negara Malaysia in measuring sustainability commitment of Islamic banks. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between closing–opening prices of stocks in the US, UK, and European markets and the prices of stocks in the five Association of Southeast Asian Nations (ASEAN-5) markets, a group consisting of five founding members, namely, Indonesia, Malaysia, the Philippines, Singapore, and Thailand. In particular, this study examines the impact of US, UK, and European stock market movements on ASEAN-5 stock markets before and during the COVID-19 pandemic. An autoregressive distributed lag (ARDL) bounds testing approach was employed on two independent data sets, representing prices of stocks before and during the COVID-19 pandemic. The results reveal that among the ASEAN-5 markets, only the Philippines had a cointegration relationship with the US, UK, and European markets before the crisis. However, almost all ASEAN-5 markets moved in tandem with the US, UK, and European markets during COVID-19, except for Thailand. These empirical findings also indicate that the stock markets in the two regions tended to co-move during the COVID-19 pandemic, implying a contagion effect. Further, the causality results also provide substantial evidence of contagion between markets during the pandemic. These results imply that the stock markets in ASEAN-5 are susceptible at the opening bell to the behaviour of US, UK, and European stocks. Therefore, investors or traders in ASEAN-5 should participate in foreign markets (other than the US, UK, and Europe) that do not exhibit cointegration relationships to better mitigate and manage risk at the opening bell, especially during a global crisis. [ABSTRACT FROM AUTHOR]

We investigate an unexplored channel through which pledged loans are exploited by the most influential firm insiders in China. Specifically, we document a significant and positive relationship between net pledging by the largest shareholder before a seasoned equity offering and her cash subscription to that very offering. [ABSTRACT FROM AUTHOR]

This paper provides a fresh look to investigate the linkage between rising house prices and corporate financialization. We match data of house prices in 237 cities with publicly listed non-financial and non-real estate companies to establish the causal relationship and further examine the underlying mechanism. The empirical study confirms that rising housing prices have a positive impact on corporate financialization, thereby emphasizing the significance of the housing boom for corporate financialization. We find that the deterring effect is stronger for firms with high cash holdings and is primarily driven by manufacturing firms. In addition, this study explores the potential mechanism generated by financing constraints and investment opportunities. The empirical results show that the housing price boom plays a significant role in promoting corporate financialization by releasing financing constraints. [ABSTRACT FROM AUTHOR]

Banks play an important role in channeling funds (about $6-10tn annually) to finance productive investment opportunities. While accepting some interest rate risk is inherent in the banking business, excessive interest rate risk can pose a significant threat to banks' earnings and capital adequacy. [Extracted from the article]

Purpose: The present study aims to explore the impact of managerial attributes on cash holding and investment efficiency and the mediating role of cash holding for companies listed on the Tehran Stock Exchange. Design/methodology/approach: Information about 178 companies in 2014–2021 was examined. In the present study, managerial overconfidence, managerial myopia and managerial ability were considered as the managerial attributes. Findings: The present findings showed that managerial attributes (i.e. overconfidence, myopia and ability) have a significant effect on investment efficiency. In addition, cash holding has a significant positive effect on investment efficiency. Furthermore, cash holding plays a mediating role in the relationship between managerial attributes and investment efficiency. Originality/value: There is a gap in the impact of managerial attributes on cash holding and investment efficiency and investigating the mediating role of cash holding. This gap creates an opportunity for studying these variables in depth. The present study contributes to the identification of factors influencing investment efficiency to advance future studies and support practical efforts. This study contributes to a better understanding of the effect of managerial attributes on investment decisions in the context of diverging opinions about manager-specific effects on company's outcomes. [ABSTRACT FROM AUTHOR]

Research Question/Issues: In this article, we analyze whether the initiative of a domestic stock exchange that designed three high‐governance listings of voluntary adoption, in addition to maintaining its traditional listing, can mitigate managers' ability to expropriate cash. As a result of the reduction in improper cash diversion in firms with higher disclosure and corporate governance standards, we hypothesize that investors place a higher value on cash in the firms that voluntarily migrate to the premium listing. Research Findings/Insights: After a series of robustness checks, we document that investors place a higher value on the cash of firms from the non‐mandatory premium listing ($0.589) in relation to the cash of the companies from the regular traditional listing ($0.239). Our findings also reveal that the market value of cash is higher in firms from the segment with the highest standards ($0.687), where companies follow the "one share, one vote" principle. Theoretical/Academic Implications: The empirical results suggest that shareholders associate the premium listings segments as a commitment that reduces the risk that cash holdings will be converted into private benefits, and consequently, they place a premium on the cash of companies that subject themselves to these levels. Hence, by lessening shareholders' markdown of cash holdings, the premium listing segments mitigate part of the value loss associated with weak governance in Brazil. Practitioner/Policy Implications: Our results provide important policy implications by demonstrating that a domestic stock exchange, by creating a premium listing of voluntary adoption, can provide mechanisms for firms to self‐select into segments with greater transparency and stricter corporate governance that, in turn, send a positive signal about the underlying risk that firms may expropriate cash. Hence, emerging countries where reforms of corporate law are designed to protect investors from facing serious political opposition may also consider creating special listings such as in Brazil, as a private contractual arrangement, to increase the protection of shareholders. [ABSTRACT FROM AUTHOR]

Research Question/Issue: Do the motivations of cross‐border minority acquisitions differ from those of domestic minority acquisitions? We examine and compare the underlying motivations for and consequences of domestic and cross‐border minority acquisitions by analyzing data from transactions that took place across 31 countries over a 13‐year period. Research Findings/Insights: Using a sample of 11,926 domestic and cross‐border minority acquisitions, we show that the interplay of financing and country‐level governance motives is the main driver of such deals in both settings. We find that financially constrained firms are more likely to engage in both domestic and cross‐border minority acquisitions, even in the face of higher information asymmetry and transaction costs that international transactions entail. In the wake of either domestic or cross‐border deals, financially constrained firms' long‐term debt increases; their short‐term debt, cash holdings, and equity decrease. The greater likelihood of minority acquisitions of financially constrained firms is explained by the degree of corporate governance institutions in the country in which the targeted firm is based and by differences in levels of creditor and shareholder protections between the home countries of the targeted and acquiring firms involved. Our results remain robust after controlling for alternative explanations such as the contracting motive, the gravity model of foreign transactions, economic development levels, and differences in tax and exchange rates. Theoretical/Academic Implications: Our results extend prior literature on mergers and acquisitions that have focused solely on control transfers or domestic deals. We provide empirical evidence for the importance of jointly considering financing and governance motivations in seeking to explain domestic and cross‐border minority acquisitions and their consequences in alleviating financial constraints. We provide new evidence on how firm‐ and country‐level characteristics interact to affect minority acquisitions. Practitioner/Policy Implications: Our results offer valuable insights for business policy by highlighting how firms can circumvent financial constraints through partial integration, especially in cross‐border settings. The results also offer evidence of beneficial ex post outcomes for targeted firms' leverage and liquidity. In terms of public policy, the results show that minority shareholder protections improve the equity market and provide a positive externality to the debt market through a certification effect. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine the impact of corruption on firm performance considering the interventional role of cash policy in the emerging market of Greece. Design/methodology/approach: The current study utilizes a sample of 142,079 firm-year observations for the period 2006–2014. Descriptive statistics, multiple regression analyses and robustness checks are used to test the study's hypotheses. Findings: The results reveal that firm performance is positively related to the control of institutional corruption, implying that firms perform better when operating in a low-corruption environment. All other things being equal, we also find that firm cash holding strengthens the positive association between control of corruption and corporate financial performance. Research limitations/implications: This research paper takes a more holistic approach by considering institutional factors in conjunction with corporate financial policies and outcomes. In a pervasive corrupt environment, the article illustrates how firm-level mechanisms can preclude political rent-seeking to improve corporate performance. The study's main limitation is that it focuses exclusively on a single country setting, based on the extreme-critical case's logic. Practical implications: The findings might be useful for business executives and regulators seeking a better understanding of the planning and implementation of firms' asset allocation strategies and anti-corruption policies. Originality/value: The study augments the relevant literature on the firm-level implications of corruption by providing empirical evidence for the interventional role of cash management in the relation between corruption and firm performance, in the context of an emerging economy. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to provide a comprehensive investigation into the different roles of cash holding decisions on Shariah-compliant and non-Shariah-compliant firms' performance. Therefore, the objective of this study is to analyze the significant relationship of liquidity on Shariah- and non-Shariah-compliant corporations. Design/methodology/approach: This study sample includes non-financial firms listed in six Gulf Cooperation Council (GCC) markets between 2005 and 2019. The study uses panel fixed effects and the dynamic generalized method of moments (system-GMM) models to test the relationship between cash holding and firm performance. The firms' performance is measured using four widely used proxies representing book and market measures of performance including return on assets, return on equity, earnings before interest and tax to total assets and Tobin's Q. Findings: The results explore that the nature of the relationship between cash holdings and performance varies across Shariah-compliant and non-Shariah-compliant firms. Specifically, cash holdings are positively and significantly related to Shariah-compliant firms' performance. However, cash reserves are not significantly related to conventional firms' performance. These findings indicate that Shariah-compliant firms rely more on their cash holdings to avoid costly and less available external financing, meet everyday business needs and invest in profitable projects. In contrast, the value for cash holding is less important for non-Shariah-compliant firms, as their external financing options are less restricted compared to Shariah-compliant firms. Research limitations/implications: This study is not free from limitations. More specifically, the sample of this study comprises of firms listed in GCC countries, which share common features. It would be interesting for future research to examine the linkage between cash holdings and Shariah-compliant and conventional firms' performance by applying a larger sample, such as firms located in countries of the Organization of Islamic Cooperation. Practical implications: The findings of this paper provide useful insights for managers and investors on the important role of cash management for Shariah-compliant firms. Policymakers and bankers need to develop Shariah-based financial products to ease Islamic financing sources. Moreover, the findings of this paper call for more research on the importance of liquidity management for Shariah-compliant firms. Originality/value: This study extends the Islamic finance literature by exploring the key role of cash holdings to Shariah-compliant firms. To the best of the authors' knowledge, this study is the first study to investigate cash holdings and performance between Shariah-compliant and non-Shariah-compliant firms. [ABSTRACT FROM AUTHOR]

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