Abstract
A company’s cash holdings are closely related to its performance and market capitalization, as well as the decision preference and management mode of managers. Among the factors affecting cash holdings, the social relationship between the most two important executives of a company, CEO and CFO, plays an important role. Accordingly, this paper studies the influence of fellow villagers’ relationship and alumni’s relationship on cash holdings of listed companies, which not only enriches the literature about the impact factors of CEO-CFO social relationship, but also provides practical guidance for cash holding adjustments of listed companies.
Highlights
Cash holding policy is the basis of financial policies, so how to optimize the allocation of the company’s cash assets is a common concern of academia and enterprises
In order to study the influence of CEO-CFO social relationship on corporate cash holdings, this paper takes the searchable relationship of senior executives in listed companies as the research objective
This paper mainly studies the impact of the alumni and hometown relationship between CEO and CFO on cash holdings of listed companies, which is one of the most important financial indicators of listed companies
Summary
Cash holding policy is the basis of financial policies, so how to optimize the allocation of the company’s cash assets is a common concern of academia and enterprises. If two people have the relationship of fellow countrymen or alumni, the psychological distance between them will be narrowed and the communication will be more convenient Considering their duties, CFOs provide professional support to the companies’ finances, and have the responsibility to supervise CEOs. Being prudence, the CFO is more willing to increase cash holdings to reduce the risk of capital flow, while the CEO may sacrifice some capital flows for the earning growth, seeking profit maximization of the company. This paper studies the influence of social relationship between CEO and CFO on cash holdings.
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