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Family control and adjustment to the optimal level of cash holding
- Source :
- The European Journal of Finance. 23:266-295
- Publication Year :
- 2016
- Publisher :
- Informa UK Limited, 2016.
-
Abstract
- Given the predominance of family control in most European corporations, understanding how this type of ownership affects firms’ cash holding policy is important. The literature has yet to address this subject satisfactorily; therefore, we outline a way to model how family firms define their cash policy, specifically, the way in which they adjust their cash holding to an optimal level. We base our analysis on trade-off theory and the precautionary motive for holding cash. Our empirical results show that family firms adjust their cash holding level more aggressively than non-family firms, and, therefore, family firms are capable of achieving optimal cash holding faster and more efficiently than non-family firms. Further, we find that family firms have a heterogeneous cash policy; in particular, young family firms, financially constrained family firms, and family firms that operate in countries with strong investor protection adjust their cash holding more aggressively.
- Subjects :
- 040101 forestry
Finance
050208 finance
Cash and cash equivalents
business.industry
media_common.quotation_subject
05 social sciences
Economics, Econometrics and Finance (miscellaneous)
04 agricultural and veterinary sciences
Monetary economics
Cash conversion cycle
Cash flow forecasting
Operating cash flow
Cash
0502 economics and business
0401 agriculture, forestry, and fisheries
Cash flow statement
Business
Price/cash flow ratio
Cash management
media_common
Subjects
Details
- ISSN :
- 14664364 and 1351847X
- Volume :
- 23
- Database :
- OpenAIRE
- Journal :
- The European Journal of Finance
- Accession number :
- edsair.doi...........2744bc0de96c870cd795370a640ff714
- Full Text :
- https://doi.org/10.1080/1351847x.2016.1168748