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Corporations have accumulated record amounts of cash. We study whether firms' cash retention has been excessive by examining a Korean reform that introduced a new tax on earnings retained as cash. Difference-in-differences tests show that treated firms reduce cash retention and instead increase payouts and investments. Market participants react favorably to the reform, consistent with excessive cash retention. The valuation effects and the alternative uses of the cash are associated with behavioral and agency frictions. Firms that are more subject to behavioral biases increase payouts and experience higher valuations, while poorly governed firms allocate more to investment and experience relatively lower valuations. 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]

This study investigates the effect of geopolitical risk (GPR) on cash holdings of Korean firms. Korea's export orientation, relationship with North Korea, and weak corporate governance together form the basis for studying the relationship between GPR and Korean firms' cash holdings. Using samples of non-financial firms from 2001 to 2021, I find the GPR positively affects corporate cash holdings. This effect is more pronounced in firms with financial constraints, listed in the KOSDAQ (smaller and less regulated) market, and during cold market periods. My finding withstands various robustness tests including fixed effects, an instrument-variable analysis, and alternative measures of GPR. Overall, this study adds to the existing literature on corporate cash holdings by confirming that firms increase cash holdings with a precautionary motive to create a buffer against GPR-generated uncertainty. [ABSTRACT FROM AUTHOR]

Using a unique database that includes publicly disclosed fund holdings at the end of the quarter as well as the holdings in all non-publicly disclosed months, we found that some funds could alter their portfolios in publicly disclosed months to artificially increase their Active Share scores and consequently appear more active and take advantage of the positive relationship between Active Share and money flows. We show how, consistent with non-informed trades, these funds erode their future performance. However, these funds reach their objective of increasing future money flows. Moreover, we find that window-dresser funds can be identified by controlling the level of tracking error. The funds with high Active Share scores and low tracking errors have the highest levels of Active Share window dressing and the worst future returns. However, compared with less active funds, they are able to capture higher money flows. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between corporate cash holdings and investment efficiency, with a focus on how COVID-19 and the presence of women directors may influence this relationship. Using data from Indonesian public companies during the COVID-19 period, comprising 2350 firm-year observations, we employ fixed-effect regression models with industry and year controls to test our hypotheses. Robustness and endogeneity tests are conducted to ensure the reliability of our findings. Our research reveals that companies with larger cash reserves tend to experience decreased investment efficiency during the COVID-19 crisis. Moreover, the negative impact of substantial cash reserves on investment efficiency is exacerbated by the presence of female directors on the board. However, our findings also suggest that female directors can mitigate the adverse effects of excessive cash reserves on a company's investment efficiency, particularly during unforeseen economic challenges such as the pandemic. [ABSTRACT FROM AUTHOR]

This study examined why consumers who typically pay electronically at points of sale still carry cash and explained the inertia of demand for cash by considering the additional (perceived by consumers) characteristics of cash. The research was motivated by the growing discussion on why cash, despite the increasing importance of e‐payments, remains a significant part of the demand for money. The study focused on psychological factors and consumers' perceptions of certain features of cash, which make it an attractive additional option for precautionary reasons, and therefore, explored beyond the typical discussion of money as a means of payment. The structural equation modeling based on data collected as part of a survey of Polish consumers was used to verify the hypotheses. It was revealed that cash becomes a reserve solution for consumers, which is kept "just in case" to expand the scope of personal freedom and flexibility in making payments and protect against various potential restrictions and threats related to e‐payments. Consumers' holding of cash as an additional option depends on three key factors: attitude toward cash, particularly the flexibility it offers, unusual purchasing situations, and perceived card or mobile payment risk, considered as a moderator. In the debate on the future of cash, the study supports the position that cash has a place in the modern payment system, although it plays a different role. Cash is a supportive backup solution. Eliminating cash significantly reduces consumer welfare. [ABSTRACT FROM AUTHOR]

Using textual analysis techniques, including seeded word embedding and bag-of-words-based content analysis, I develop a firm-level measure of supply chain risk exposure from a novel source of unstructured data—the discussion between managers and equity analysts on supply chain-related topics during firms' quarterly earnings conference calls. I validate the measure by showing that (1) the measure exhibits intuitive variations over time and across firms, successfully capturing both routine and systematic supply chain risk events; and (2) the measure is about risk exposure, as it significantly correlates with realized and options-implied stock return volatility, even after controlling for well-known aggregate risk measures. I then demonstrate that the measure is specifically indicative of the supply chain component of risk exposure. (3) Consistent with theoretical predictions, firms facing higher supply chain risks have higher inventory buffers, particularly in raw materials and intermediate inputs, increased cash holdings in lieu of investments, and significantly lower trade credit received from suppliers. Moreover, (4) during unexpected risk episodes, such as the Tohoku earthquake, firms with higher ex ante risk exposure have worse operating and financial performance. These results indicate that the text-based measure provides a credible quantification of firm-level exposure to supply chain risks and can thus be reliably utilized as outcome or explanatory variables in empirical supply chain research. This paper was accepted by Jeannette Song, operations management. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4927. [ABSTRACT FROM AUTHOR]

This study advances the literature in cash holdings in that it empirically examines the impact of corruption prevention commitment (CPC) on the cash holding strategic decisions and how such CPC might interact with cash holdings to affect firm value. We employ a sample of UK non‐financial publicly listed firms and our results are of twofold. First, we detect a significant negative relationship between CPC and cash holdings, which is consistent with the expected governance effect of CPC. Second, we find a negative interaction of CPC with cash holdings when investigating cash holdings effect on firm value, suggesting that shareholders consider CPC as an overinvestment in corporate social responsibility (CSR) activity within a strong customer protection framework, such as the UK. Our findings are robust to different econometric estimations and controlling for different explanatory variables. This study offers beneficial perceptions into the notion of sustainability and sustainability standards and their implications on firms financing decisions. Finally, we argue that while this paper investigates the UK context, our results might be applicable to other countries with similar anti‐corruption structure as in the UK. [ABSTRACT FROM AUTHOR]

We study the impact of a unique financial anomaly—the simultaneous persistence of greater cash holdings and interest‐bearing debts (SP‐GCHID) on stock price. Due to institutional diversity and the nature of transition economies, high cash holdings do not always stem from precautionary motive as usually claimed but can be the result of cash misappropriation and debt manipulation by major shareholders. Analysing data from Chinese listed firms from 2010 to 2018, we find that SP‐GCHID is associated with a higher stock price crash risk (SPCR). It is more evident among firms with major shareholders pledging their shares and firms exposed to more external information monitoring. SP‐GCHID also affects SPCR through increasing real earnings management, further suggesting that major shareholders' misappropriation is the main reason for SP‐GCHID's adverse effect. These findings are also robust in a range of endogenous tests. To our knowledge, this study is the first to explore the economic consequences of SP‐GCHID. [ABSTRACT FROM AUTHOR]

Multifactor productivity (MFP) growth is an imperative economic engine. MFP dynamism across five advanced and seven developing countries from 1996 to 2015 is analyzed, elucidating its association with financing and intangible assets. Debt is manifested by its inverted U-shaped nonlinear relationship with MFP advancement, while corporate cash holdings are negatively (positively) associated with MFP development in five (three) countries. The heterogeneous relationships between intangible assets and MFP growth are identified across industries, countries, and time; intangible assets are requisite MFP growth enhancers for manufacturing in developing countries, for service businesses in advanced countries, and for the period after the global financial crisis. The greater the productivity effect of intangible assets is, the higher a country's per-capita income and/or governance quality becomes. Additionally, the results evince the catching-up of MFP to the technological frontier. Moreover, older firms exhibit slower MFP growth than their peers, whilst the positive effects of firm size on MFP growth are larger in high-tech and knowledge-intensive industries. [ABSTRACT FROM AUTHOR]

I conjecture that a firm's sensitivity to industry shocks escalates its need to retain a cash buffer. Consistent with this conjecture, I find that a 1 SD increase in a firm's industry risk exposure increases cash holdings by 10%. In fact, industry risk has a greater effect on corporate cash holdings than does economywide and idiosyncratic risk in my sample. The effect of industry risk exposure on corporate cash holdings is greater for firms in highly competitive industries, as well as for firms with high leverage, a greater fraction of short‐term debt, and few tangible assets. [ABSTRACT FROM AUTHOR]

We find a significant positive role of chief executive officer (CEO) social capital on the level of corporate risk‐taking for Chinese listed firms from 2008 to 2019. We reveal that a better business environment tends to reduce this positive relationship. In addition, we also find that corporate innovations provide moderation effects on the relationship. Further analysis of heterogeneity tests on firm characteristics suggests that CEO social capital's effect on corporate risk‐taking is significant and stronger for non‐state‐owned enterprises, firms with fewer female directors on their board, and firms with more cash holdings. [ABSTRACT FROM AUTHOR]

Chinese firms simultaneously have high levels of loans and cash holdings. Through listed firms on the Shanghai and Shenzhen Stock Exchanges, we establish a negative link between cash holdings and a firm's loan bargaining power, especially in regions with less bank competition, through a firm's passive response to bank requests rather than its voluntary excess cash reserves. Furthermore, state ownership, collateral, economic contribution, and reduced information asymmetry may effectively strengthen firm bargaining power and moderate the link. However, better marketisation strengthens the link. The banking sector may need to improve its efficiency through better credit rationing in future reforms. [ABSTRACT FROM AUTHOR]

We examine the catering of managers to investors' preference for cash holdings. We find that cash is positively related to the cash‐holding premium as represented by the difference in the market‐to‐book ratios between cash‐rich and noncash‐rich firms. This positive effect can be attributed to different sources such as internal and external financing, and firms may switch their sources for holding cash when catering to investors' preference. Issuing firms benefit from catering to cash holdings by obtaining higher valuations from the stock market. The catering theory helps explain cash savings especially for firms without a good timing window or financing need. [ABSTRACT FROM AUTHOR]

This paper examines whether state ownership and political connections affect the relationship between customer concentration and cash holdings for Chinese listed manufacturing firms. We show that non‐state‐owned firms, but not state‐owned firms, hold more cash as customer concentration increases. In addition, political connections weaken the positive effect of customer concentration on non‐state‐owned firms' cash holdings. Our supplemental analyses further show that for non‐state‐owned firms with limited access to finance—for instance, firms with low analyst following, low institutional ownership, or low government subsidies—the effects of political connections on weakening the positive association between customer concentration and cash holdings are more pronounced. Additional robustness tests support our arguments. [ABSTRACT FROM AUTHOR]

The average maturity of newly issued corporate bonds has declined substantially over the past 40 years, and the traditional determinants of debt maturity fail to explain this decline fully. We show that the changing composition of investors in the corporate bond market influences bond maturities. The results of a Granger causality test, an instrumental variable approach, and a natural experiment suggest that a decline in the insurance companies' – which prefer long-term bonds – ownership share in the corporate bond market explains a significant part of the unexplained maturity decline. These findings illustrate how investor preferences can have real effects on corporations. [ABSTRACT FROM AUTHOR]

Cash holding decision‐making is one of the main corporate challenges for family firms (FFs), with significant consequences for their growth and survival. It is closely connected to key financial decisions such as financing, investments, and dividends. The motivations behind adjusting cash holdings vary, encompassing precautionary, risk avoidance, opportunity cost considerations, and the spending hypothesis. In our study, we aim to integrate specific motivations for cash holding decisions that stem from the influence of family dynamics within these businesses since FFs have unique characteristics, which affect their financial choices. Therefore, we analyze the impact of family involvement in management and the generational stage of FFs on their level of cash holdings. The results of the partial least squares–structural equation modeling, which was estimated on a sample of 7269 unlisted Spanish FFs, show that the higher the level of family involvement in management, as well as the higher the generational stage, the higher the level of cash holdings, with this having a positive effect on the firm's performance. In addition, we find that the positive relationship between family involvement in management and the level of cash holdings is strengthened by family ownership and weakened by family governance. These findings are relevant for a better understanding of the complexity of cash holding decision‐making in FFs and have practical implications not only for the FFs themselves but also for the entities related to them due to the important links between a firm's liquidity and its risk of default and performance. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this study is to examine the relationships between chief executive officers (CEOs) with military service and firm dividend and cash holding decisions. Design/methodology/approach: The authors use a sample of Standard and Poor's (S&P) 1500 firms in the USA over a sample period from 1999 to 2017 and a panel data approach, as well as instrumental variable (IV)analysis. The models control for firm characteristics as well as industry and year-fixed effects. Findings: The results show CEOs with military service are associated with higher total payout and less cash. Higher dividends appear to drive the total payout result. When cash holdings are split into pure cash and short-term investments, the reduction in cash holdings is driven by a reduction in pure cash. The findings are more pronounced for powerful CEOs and CEOs with low labor mobility. Military CEOs are also associated with less risk, measured by stock return volatility and return on assets (ROA) volatility. Originality/value: Overall, the results are consistent with military CEOs implementing conservative policies that reduce firm risk, curtailing the demand for precautionary cash and reducing the necessity to forego dividend payouts. [ABSTRACT FROM AUTHOR]

This research investigates how supply chain finance (SCF) affects the investment efficiency of new energy firms by adopting a sample of Chinese listed new energy enterprises from 2011 to 2019. With the help of data envelopment analysis (DEA) combined with the Banker-Charnes-Cooper (BCC) model, we calculate efficiency values and analyze the regression results of the Tobit model, and find that SCF significantly boosts the investment efficiency of new energy corporations by improving their cash-holding position. The results of mechanism analysis also suggest that both supply chain concentration and digital finance positively magnify the relation between SCF and corporate efficiency. After comparing the impact in the new energy firms with different characteristics, we conclude that the SCF effect in promoting corporate investment efficiency is more prominent for non-stateowned new energy enterprises located in the western region that have low equity concentration. The conclusions of this paper shed new light on the fusion of the SCF business into building a new energy industry cluster. [ABSTRACT FROM AUTHOR]

The paper seeks to examine the role of Islamic finance as a mediating instrument in a case of an increasing population and housing deficit. The paper adopted a content review analysis and a modified revenue function approach in analyzing the potentials of the instruments of Islamic finance. The study focused on zakat, sadaqah and sukuk as tools of Islamic financing. E-Sadaqah was analyzed based on the number of active Telecoms line subscribers in Nigeria, and if N20 is paid weekly at a 5% level of cash collection error rate coupled with an admin expenses of 15%. The study revealed that zakat has the potentials of generating about USD8M-USD21M while sadaqah could generate N154 billion annually. If combined they can be used to improve the welfare or needs of the growing population. The study further revealed that sukuk if issued to the tune of N1,002 billion which can be utilized to build about 330,820 housing estate across the six (6) geopolitical zone of the country. The study concluded that Islamic finance can contribute significantly in addressing these economic ills of increasing population and housing deficit. The study recommends that efforts should be made on public awareness in order to enlightened the Nigerian populace about benefits of zakat, sadaqah, sukuk via local media like TV, radio in local dialects, magazines, articles, legal framework such as Zakat Act is required and deployment of IT infrastructure. [ABSTRACT FROM AUTHOR]

The study examines the relationship between debt financing and firm performance through the lens of agency costs during the Covid-19 period for standalone firms and firms affiliated with business groups. It does the same for firms engaged in manufacturing and services. Using 4,422 firm-year observations from nonfinancial firms from 2014 to 2020, the study finds that business group firms raised more new debt vis-à-vis standalone firms. On the other hand, service sector firms raised more debt than manufacturing firms. The findings suggest that agency costs declined during the Covid-19 shock, enabling firms to raise debt primarily to increase their liquidity during an uncertain period. Companies had a substantial amount of cash meant for investments in the future. Under these circumstances, corporate governance mechanisms should be strong to prevent the misallocation/misappropriation of funds, thus reducing future agency costs. [ABSTRACT FROM AUTHOR]

Given that marriage transforms people, with wide‐ranging and long‐lasting impacts, we examine the role of CEOs' marital status on firms' cash holdings behaviour. Using a large sample of US‐listed firms, we find that single CEOs stockpile more cash than their married counterparts do. Our finding is robust to controlling for various CEO characteristics, CFO influence, tackling endogeneity concerns and using alternative measures of cash. Moreover, we show that exogenous CEO turnover resulting in appointments of single (married) CEOs increases (decreases) cash holdings. Additional results show that single‐CEO firms practise a more conservative payout policy and save more cash from operating and financing cash flows. Consistent with agency theory, single CEOs extract more compensation from the accumulated cash, leading to a lower value of cash holdings. External corporate governance mechanisms mitigate the relationship between single CEOs and cash holdings. Our results show that single‐CEO firms are more prone to agency problems. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of the study is to investigate the impact of asset redeployability on the level of corporate cash holdings. Design/methodology/approach: The authors use regression analysis to examine the relation between asset redeployability and corporate cash holdings. Findings: Using a large panel sample of US public firms from 1990 to 2020, the authors find a significant positive relation between asset redeployability and cash, which suggests that firms with more redeployable assets hold more cash. Originality/value: The authors contribute to a growing literature in accounting and finance that investigates the impact of asset redeployability on firm characteristics and also contribute to the literature on the determinants of cash holdings. [ABSTRACT FROM AUTHOR]

The paper evaluates the impact of Covid-19 pandemic on firm performance along with other corporate finance variables. As expected, Covid-19 had a negative impact on firm’s performance, especially on small firms with pronounced leverage. The paper also highlights that firms with higher cash holdings were resilient in the face of the pandemic. Manufacturing firms were the worst hit as their tasks could not be executed remotely; supply chain of raw materials was severely disrupted. Another sector that bore the brunt was travelling and hospitality, where tasks cannot be digitized. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine the association between environmental, social and governance (ESG) performance and cash holdings, as well as whether this association is moderated by Shariah-compliant status. The aim was to test the joint effect of two ethical precepts, namely, the ESG and Shariah-compliant status, in explaining variations in cash holdings. Design/methodology/approach: A sample set that consisted of 9,244 firm-year observations from 25 countries from 2016 to 2020 was analysed using regression analysis. Firm-level data were sourced from Thomson Reuters and Refinitiv databases, while country-level data were derived from the World Bank and Hofstede Insights websites. Findings: Firms with greater ESG performances were found to have higher cash holdings. The positive association between ESG performance and cash holdings was greater for Shariah-compliant firms compared to non-Shariah-compliant firms. In support of the stakeholder theory, the evidence indicated that Shariah-compliant firms with higher ESG commitments also have higher cash holdings as part of their corporate strategy. Practical implications: These findings provided further comprehension to investors that ESG practices among Shariah-compliant firms are essential information during investment decision-making processes. Social implications: These findings highlighted ethical corporate practices through two frameworks, namely, ESG commitment and Shariah compliance; hence, contributing towards strategies to reach the Sustainable Development Goal 16 of promoting just, peaceful and inclusive societies. Originality/value: This study has focused on the motives for cash holdings by considering the ethical precepts embodying ESG and Shariah compliance to uphold the positive impact of high cash reserves. [ABSTRACT FROM AUTHOR]

We study the relationship between climate change social norms (CCSN) and corporate cash holdings for U.S. firms. We find that county-level CCSN is significantly positively associated with cash holdings. Our main finding is robust to a battery of robustness tests. In a subsample analysis, we find that firms have relatively low cash holdings in low CCSN counties even when faced with high climate risk. For such firms, the lack of cash buffer could be harmful to a broader set of stakeholders faced with heightened climate risk. We also show that cash holdings are a potential mechanism through which CCSN influences future environmental corporate social responsibility (CSR) performance. Overall, our study suggests that county-level CCSN has significant implications for corporate cash holdings. [ABSTRACT FROM AUTHOR]

The researcher examines the effect of spending on corporate social activities on cash holdings. The financial dataset was collected using the Prowess database and corporate social responsibility expenditure from the Indian CSR portal. Using a panel dataset of 12 Central Public Sector Enterprises indexed in the National Stock Exchange was considered as a sample for the current research. A random effect model was applied to test the hypothesis. The study's findings provide a positive indication of the causal effect of spending in corporate social activities on cash holdings. The author has considered the expenditure amount of corporate social responsibility on the sample of public sectors undertaking of India. As in previous studies, authors had considered CSR ratings. This study provides proficient information to the top management level, shareholders, and stakeholders of the Central Public Sector Enterprises regarding the disbursement of corporate social activities in India. [ABSTRACT FROM AUTHOR]

Our study investigates how CEO-friendly boards influence the value and utilization of cash resources. In this paper, we analyze two conflicting views on CEO-friendly boards and their impact on corporate cash holdings: one view posits that such boards might be too lenient, fostering managerial moral hazard problem, while the other contends that they encourage CEOs to share information, despite CEOs knowing that better-informed boards could enforce stricter oversight. By measuring board friendliness through CEO-board social ties, we find that firms with a friendly board tend to maintain lower cash reserves but their excess cash is valued higher by the market compared to firms without such a board. Moreover, these boards deploy excess cash in ways that significantly enhance firm value. The results remain robust even after controlling for various governance variables and CEO characteristics. Our findings offer crucial insights for corporate practitioners and policymakers, highlighting the importance of appointing and retaining CEO-friendly directors to foster effective information exchange, especially in firms with substantial CEO-board information asymmetry in capital budgeting. [ABSTRACT FROM AUTHOR]

The literature about the influence of country corruption on corporate cash holdings is not conclusive as there are studies supporting both a positive and negative relationship. To better explain this relationship, our study introduces a corporate-level mediating variable, i.e. the company's willingness to fight bribery as part of its CSR policy. Using a sample of 1,075 listed firms from 21 European Union countries for the period 2008–2019 (7,771 firm-year observations), we find a partial mediating effect of the corporate anti-bribery policy on the relationship between country corruption and corporate cash holdings. On the one hand, according to the shielding argument, country corruption negatively influences corporate cash holdings. And, on the other hand, there is a mediating effect such that firms in corrupt countries adopt less tough anti-bribery policies and, instead, they reduce their cash holdings both to protect themselves from expropriation and to signal their limit on bribe payments. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This work aimed to examine the effect of corporate cash holdings on financial performance. The data covered 536 non-financial firms for the 2006–2020 period from 11 MENA region countries. This study used fixed- and random-effects testing models. To the best of the authors' knowledge, this is the first study that aimed to study the effect of corporate cash holdings on financial performance in MENA countries in two aspects: linear and non-linear relationships. By using the return on assets, return on equity, earnings before interest, and the tax margin as the indicators of financial performance, we developed two groups of models investigating the linear and non-linear relationships between cash holdings and profitability measures. The models included several control variables, namely leverage, firm size, sales growth rate, tangibility, dividend pay-out ratio, and gross domestic product (GDP) growth rate. The results of this study revealed that both the linear and non-linear models produced significant results for the return on assets and the return on equity, but for the earnings before interest and tax margins, the linear model was insignificant. The non-linear models indicated an optimal level of cash holdings. In this context, the policymakers must actively evaluate these policies, such as working capital management and its effect on financial performance. In addition, the policymakers must consider macroeconomic conditions when designing corporate cash-holding policies. [ABSTRACT FROM AUTHOR]

The purpose of this study is to investigate the impact of asset status and external factors related to asset status on income distribution disparities among senior executives, employees, and shareholders. Incorporating micro-level data and theoretical analysis, the data of Chinese a-share listed companies from 2012 to 2021 are selected for panel regression analysis. Existing research has often focused on the main differences in income between employees and executives. This study reveals that the distribution of total corporate income among employees, executives, and shareholders can better reflect the fluctuating trend of income variance among different groups. It was found that asset efficiency, asset market value, and asset property rights, among other asset status factors, significantly influence the degree of inequality in income distribution. Empirical research results indicated that corporate executives can benefit similarly to shareholders from improvements in asset efficiency and other asset status factors. Following an increase in corporate cash holdings, executives tend to benefit more relative to employees. Additionally, digital inclusive finance and equity concentration both have moderating effects, mitigating the impact of asset status on inequality in income distribution. [ABSTRACT FROM AUTHOR]

This study examines whether and how Public Company Accounting Oversight Board (PCAOB) international inspections mitigate the market value discount in cash holdings. We find that shareholders value internal cash holdings more highly for the non-U.S.-listed clients of inspected auditors after the public disclosure of the auditors' inspection reports. We show that the decreased agency frictions and the increased financial reporting credibility are potential mechanisms. Further, we find that the effect of PCAOB international inspections on the market value of cash holdings is stronger in countries with weaker legal institutions and less sound information environment. Since investors' valuation of cash mirrors how they expect the cash to be used, our results suggest a unique role of PCAOB oversight in mitigating unresolved agency problems and safeguarding corporate resources, thereby lessening investors' markdowns of cash assets. Our findings help identify the real economic impacts of PCAOB oversight in enhancing global stock market confidence. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G34; M42; M48. [ABSTRACT FROM AUTHOR]

Copyright of Transformations in Business & Economics is the property of Vilnius University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Theoretical background: High levels of cash holdings allow companies to be financially flexible. Cash holders can react to business opportunities at once, and avoid dependence on external financing. Having cash reserves acts as a protective cushion from possible business shocks. However, cash holdings, like other asset items, incur cost. The direct costs mostly relate to obtaining and servicing of financing. Excessive cash may also induce the agency problem of free cash flow. Information asymmetry, among other factors, influences cost of capital and the efficiency of investor monitoring. Earnings management strategies are related to the informativeness of financial reports, as they can either support or disturb the assessment of company risk and performance. Hence, companies search for tailor-made strategies that usefully trade-off the benefits and costs of cash reserves and earnings quality. Purpose of the article: Earnings management occurs either via intervention in the reporting process using accruals, or changing the structure or the timing of real business transactions. This study aims to assess the differences in accrual and real earnings management strategies between firms with relatively high and low cash reserves. Based on a sample of non-financial companies listed on the Warsaw Stock Exchange in Poland, this research provides evidence on the relationship between the level of cash holdings and earnings quality. Research methods: Earnings management is proxied with annual cross-sectional regressions estimated in non-financial GICS sectors. The Jones and the modified Jones model allow to estimate expected accruals. Using the Roychowdhury approach, normal cash flow from operations, normal production costs, and normal discretionary expenses are estimated. These normal levels are compared with their actual value to proxy for accrual- and real-earnings management. Next, each company was assigned to one of two groups, depending on the level of cash holdings relative to the annual industry medians. Parametric and non-parametric tests were used to test statistical significance. Main findings: The empirical results show statistically significant differences in accrual and real earnings management between companies with relatively high and low cash reserves. Cash holders seem to be more likely to manage earnings via shifting accruals between periods. However, there is no evidence that any of the groups boosted earnings more. Unsigned earnings management proxies suggest lower informativeness of financial reports for companies with cash buffers. Cash holdings were positively related to activities aimed at reducing fixed costs per unit and savings on discretionary expenses. Summing up, this research shows that companies with greater information asymmetry related to poor earnings quality preferred to hold larger cash reserves. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to investigate the roles of intellectual capital efficiency and institutional ownership on cash holdings and their speed of adjustment. Design/methodology/approach: Using a sample of 432 firm-year observations of tourism-listed companies, three measures of cash holdings are used as dependent variables and intellectual capital efficiency and institutional ownership as independent variables. The financial data is collected from the S&P Capital IQ database for the period 2015–2020. Two system-generalized methods of moment estimation are used for the robustness checks of the results. Findings: The study provides evidence that an increase in intellectual capital efficiency in tourism firms results in lower cash holdings. The research findings also report that characteristics such as firm size, age and market-to-book value ratio are associated with cash holdings. Furthermore, institutional ownership in these firms did not affect the cash holdings. The results also confirm the existence of a target cash holding level to which the tourism firms attempt to converge. These results are robust to the alternative proxy of cash holding and endogeneity tests. Research limitations/implications: The study uses intellectual capital efficiency measured by the model proposed by Pulic. Alternative measures of intellectual capital can be included in future studies. Future research can also investigate the impact on cash holdings before and during the pandemic for tourism companies. The study is limited to the impact of institutional ownership; thus, research can be extended to consider other types of ownership. Practical implications: The findings of this study indicate that tourism companies should take into account the impact of intellectual capital efficiency on their cash holding decisions. The industry uses a specific financial management strategy in light of better efficiency and possibly values the opportunity cost of holding more cash. Additionally, regulators should re-examine the role of institutional ownership in tourism firms, as it was found to have no impact on cash holdings. The regulators may need to consider other factors, such as firm size and age, when developing policies and regulations to ensure that tourism firms have adequate cash holdings. Originality/value: This study adds to the body of knowledge on the factors that influence cash management and ideal cash levels for the tourism industry. The examination of the effect of intellectual capital on cash holdings is a novel contribution, filling a gap in the existing literature. The findings on the speed of adjustment towards optimal cash holdings also provide support for the trade-off theory. [ABSTRACT FROM AUTHOR]

Research Summary: When can a firm make fine‐grained adjustments to misaligned subsidiary governance? We examine whether and under what conditions a firm will adapt the equity stake it owns in a subsidiary, enabling improved alignment of the stake with the uncertainty in the local environment. We predict that the rate of adaptation of misaligned equity stakes depends on the experiential and vicarious learning from which the firm can draw, and that these learning effects are contingent on possessing fungible slack resources, specifically cash. Using a sample of 726 Japanese‐foreign subsidiaries established in 38 host countries over a 21‐year period, we find support in line with our predictions. Overall, this study explicates heterogeneous adaptability in subsidiary governance and similar strategic tasks. Managerial Summary: Whether due to suboptimal choices or changing conditions, firms must sometimes change how they relate with and control their subsidiaries. Whereas much research has addressed adaptation in the form of discrete changes in ownership mode, we examine under what conditions a firm can make fine‐grained adjustments to misaligned subsidiary governance. We argue that a firm can learn to make such adjustments, not only from its own experience but also vicariously by observing other firms in the same foreign environment. Furthermore, we consider whether cash is a valuable resource for this purpose. Overall, this study shows how firms can pursue strategic adaptation in subsidiary governance and related tasks. [ABSTRACT FROM AUTHOR]

We examine the effect of CEO marital status on corporate cash holdings. Consistent with the classical agency framework, we find that firms with single CEOs hold more cash compared to otherwise similar firms with married CEOs and that the excess cash held by single CEOs is significantly discounted by shareholders. Our findings survive a battery of tests to ease endogeneity and selection bias, confirming that results are not simply reflecting innate heterogeneity in preferences. Overall, our findings indicate that a variable outside the common firm‐ and macro‐level determinants, CEO marital status, can significantly influence corporate policies. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to investigate the impact of ownership by large shareholders (blockholders) on corporate cash holdings. The study further investigates heterogeneity in the relationship between blockholder ownership and corporate cash holdings. Design/methodology/approach: Building on the precautionary and agency motives of corporate cash holdings, the study focuses on publicly listed firms from 22 European countries for the period from 2006 to 2015. Multiple pooled ordinary least square and fixed effects regression models are employed to examine the relationship between blockholder ownership and firms' cash holdings. Findings: This study documents a positive relationship between blockholder ownership and corporate cash holdings which indicates the role of blockholders in influencing firms' cash holdings policies. However, further analyses show that the effect of blockholding on cash holdings depends on the type of blockholder. While the relationship is still positive between cash holdings and ownership by strategic blockholders, it turns negative for the ownership by institutional blockholders. Research limitations/implications: This study provides evidence for the important role played by firms' ownership structures, and especially blockholding, in shaping firms' cash holdings decisions. The findings are therefore of great value for investors, firms' management and board and policy makers. Originality/value: This paper contributes to the literature by providing an explanation of the contradictory results documented in the literature on the impact of blockholders on corporate cash holdings. This study, to the best of the author's knowledge, is the first to examine the effect of blockholder ownership on cash holdings by distinguishing between different types of blockholder. [ABSTRACT FROM AUTHOR]

Purpose: The study examines how the liquid assets holdings among non-financial Indian firms vary due to tightening monetary policy and increasing macroeconomic uncertainty. Design/methodology/approach: The authors analyze 5,640 firms for the period 2011–2021. The authors first estimate India's monetary policy shocks by decomposing the exogenous shocks from the systematic component of monetary policy changes. The authors then examine the effects of the estimated monetary policy shocks and a range of macroeconomic and policy uncertainty indicators on companies' cash and bank balances to asset ratios using two-step system generalized method of moments (GMM) estimators. Findings: The authors find that monetary policy shocks cause the cross-sectional variances for the firms' liquidity holdings to increase. In anticipation of macroeconomic volatility, companies respond to these shocks after taking into account all the firm-level information to minimize the opportunity costs of holding extra cash or too few cash balances that can hamper firms' operations. Furthermore, compared to other shocks, the contribution of inflation-induced shocks is predicted to be the largest in the cross-sectional deviation of the firm's cash holdings. The authors also find that low-growth, older and financially constrained firms observe lesser heterogeneity in their cash holdings as they tend to hold cash as a precautionary buffer. Originality/value: The authors' approach to the analysis is unique in many ways. To address potential transmission bias, the authors use nowcasts and forecasts of real gross domestic product (GDP) growth and inflation to generate a series of exogenous monetary policy shocks for identifying unanticipated changes in short-term interest rates. Subsequently, the authors estimate how these shocks affect the cross-sectional deviation of liquid assets. For estimating the effects of macroeconomic uncertainty on corporate cash demand, the authors utilize a range of proxies for uncertainty. Unlike previous attempts, the authors offer evidence for a developing and fast-emerging economy. [ABSTRACT FROM AUTHOR]

This study investigates the impact of rivals' announcements of innovation‐driven mergers and acquisitions (M&As) on focal firms' ex‐post corporate innovation performance. Exploiting a hand‐collected dataset of Chinese listed firms from 2011 to 2018, we find that focal firms file fewer patents after rivals' announcements of innovation‐driven M&As. Further analyses show that focal firms become more conservative and hold more cash when rivals intend to obtain innovation resources through M&As. We find that such crowding‐out effects are more pronounced for focal firms that are more financially constrained, those facing higher competition, those whose rivals are industry leaders, and those operating in traditional industries. [ABSTRACT FROM AUTHOR]

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]

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]

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]

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]

The objective of this paper is to validate the existence of an extensively documented secular upward trend in corporate cash holding. To do this, we use the new data for Poland and review original datasets from Bates et al. [2009] for the U.S. We find no trace of a trend for Poland and believe most trends for the U.S. come from the cash piling toward the end of the sample period. At best, the U.S. trend applies merely to small firms. We believe cash holding is a period-dependent time-varying variable which also depends on external shocks (e.g., the pandemic or tax regulations). We show that simple addition of macro data (GDP in our case) vastly improves models focused only on optimal cash holding and firm-specific characteristics. We call for a new three-stage approach to study corporate cash, in which micro considerations are complemented by macro data and external liquidity shock analysis. [ABSTRACT FROM AUTHOR]

The prior literature links cash holdings and returns (Simutin (2010), Palazzo (2012)). Using two signals of aggregate-funding availability, I find that the positive association between cash and returns only exists during constrained funding environments. In unconstrained periods, there is no association between cash and returns. The relation in constrained environments does not appear to be related to capital expenditures, expected return, or distress risk but is more prevalent in firms undertaking research and development (R&D) expenditures. This suggests that the association between cash and returns is more consistent with expanding (or maintaining) future growth opportunities rather than being attributable to differences in capital expenditures or risk. [ABSTRACT FROM AUTHOR]

We show that high cash holdings can be used by executives in the ex post bargaining over their compensation. Cash holdings are positively associated with CEO compensation and is driven by non-salary components. In companies with weaker governance, this relation is more pronounced. Using exogenous shocks to the firm's cash, we show that CEO compensation readily responds to increases in cash holdings, confirming that managers are able to derive personal benefits from excess cash holdings. [ABSTRACT FROM AUTHOR]