Corporate Cash Holdings Research Articles

Environmental Regulation and Corporate Cash Holdings: Evidence From China’s New Environmental Protection Law

Exploiting the 2014 Environmental Protection Law (EPL) in China as quasi-natural experiments, we adopt a difference-in-differences approach to examine the impact of environmental regulation on corporate cash holdings. We document that heavy-polluting firms increase their cash holdings 15% more than non-heavy-polluting firms due to stringent environmental regulation. Further tests show that the heightened environmental uncertainty, the limited access to bank loans, and the decline in obtaining government subsidies for heavy-polluting firms are three plausible channels that allow environmental regulation to increase corporate cash holdings. The effects of environmental regulation on cash holdings are stronger for firms without political backgrounds and those in regions with less dependent on the secondary sector. Overall, our results offer original evidence showing how environmental regulation in emerging economies affects firms’ liquidity management decisions and support the precautionary effect of cash holdings.

ETF ownership and corporate cash holdings

AbstractDo exchange‐traded funds (ETFs) influence corporate cash holding decisions? Consistent with reduced managerial learning from the stock market and increased uncertainty due to higher ETF ownership, we show that firms included in ETF baskets have higher cash holdings as a precautionary response. We address endogeneity concerns through different natural experiments, namely, the reconstitution of the Russell 1000/2000 index and BlackRock's acquisition of iShares. We identify changes in revenue, external financing, share repurchases and net working capital as potential channels through which cash holdings increase due to higher ETF ownership, with cash holdings increases having a positive impact on firm value.

Corporate cash holdings and disclosure violations: an empirical investigation of Jordanian listed companies

PurposeThis study aims to examine the impact of low-quality financial statements; that is, disclosure violations reported by the Securities Exchange Commission related to the level of cash holdings (CH) of firms listed on the Amman Stock Exchange (ASE).Design/methodology/approachUsing panel data from 107 ASE-listed companies from 2009 to 2018, the study uses generalized method of moment estimation to examine the research hypothesis. This study hypothesize that disclosure violations can affect the level of CH and control for several variables that affect this level.FindingsThe results show that disclosure violations significantly affect the level of CH and that cash flow, capital expenditure and debt issues have a significantly positive impact on corporate CH. On the other hand, the market to book ratio and sales growth were found to be insignificant.Research limitations/implicationsThe limitations of the research include the fact that information on research and development and equity issues were not available, so were not included in the examination.Practical implicationsIt is recommended that managers enhance the quality of disclosures since this allows them to hold lower levels of cash and exploit more investment opportunities. Policymakers are recommended to supervise firm disclosures closely and create ratings for disclosure quality.Originality/valueTo the best of the author’s knowledge, this is the first empirical research on the association between proven low-quality disclosures and the level of corporate CH among Jordanian listed companies.

Managerial risk-taking incentives and cash holding in U.S. firms: Evidence from FAS 123R

Employing FAS 123R, which mandated option expensing, as a quasi-natural experiment, we investigate the causal effects of CEO risk incentives (vega) on cash policies of U.S. firms. Employing a difference-in-differences framework with propensity-score matching, we find no association between changes in CEO portfolio vega and corporate cash holdings, including the marginal value of cash. Our finding applies to both firms most and least affected by the regulatory change. Thus, our evidence challenges the view that stock options are a first-order determinant of corporate cash policy, implying that any previously documented relation may reflect endogeneity rather than a causal influence.

The impact of institutional factors on corporate mechanism of cash adjustment – New evidence from emerging Asia

PurposeThe purpose of this study is to understand how the business environment of a country has an impact on cash management policies of the firms and also to investigate if there is any asymmetry in cash adjustment dynamics when a firm deviates from its long-term target of cash holdings.Design/methodology/approachUsing a sample of seven emerging Asian countries in the period 2001–2019, the authors investigate the role of country specific variables in the corporate cash holdings and their cash adjustment mechanism. They use the panel data regression method to estimate the results.FindingsThe authors find that the overall financial development of a country has a significant impact on corporate cash holdings and cash adjustment dynamics. When a firm has excess cash, the speed of adjustment towards the target is faster as compared to when it has deficit cash holdings. Further, when a firm holds excess cash, it adjusts towards the target using cash from investments; in case of deficit cash holdings, the adjustment happens via cash from financing activities.Practical implicationsThe results of the study are helpful to corporate managers as these are important references to them to understand and design cash management policies by considering factors that are measured at the country level. It also provides them a clearer understanding about the role of corporate board and information asymmetry in cash holdings.Originality/valueThis is the first study which examines the role of country-specific variables on corporate cash holdings and their adjustment mechanism of firms in emerging Asia. Further, the study extends the literature by providing new evidence that there is asymmetry in cash adjustment dynamics of firms after controlling for the overall financial development of a country.

CEO Age, CEO Tenure, and Corporate Cash Holdings: Evidence from Listed Firms in Taiwan

CEO Age, CEO Tenure, and Corporate Cash Holdings: Evidence from Listed Firms in Taiwan

Does Culture Matter in Corporate Cash Holdings?

Does Culture Matter in Corporate Cash Holdings?

The Influence of Peers' Md&A Tone on Corporate Cash Holdings

The Influence of Peers' Md&A Tone on Corporate Cash Holdings

An analysis of customer change, government support, and cash holdings

This paper uses a research sample listed manufacturing companies in China and systematically studies the impact of customer change and government support on corporate cash holdings and economic consequences. The empirical results show that there is a significant positive correlation between customer change and cash holdings, and the value of cash holdings is higher among enterprises with customer changes. This study enriches and expands the literature on customer relations and cash holdings, and we confirm the important practical significance of government support for the development of the manufacturing industry.

Impact of the COVID-19 Pandemic on Corporate Cash Holdings: Evidence from Korea

Impact of the COVID-19 Pandemic on Corporate Cash Holdings: Evidence from Korea

The Relationship between Corporate Risk Taking and Corporate Cash Holding in Saudi Industrial Companies

The Relationship between Corporate Risk Taking and Corporate Cash Holding in Saudi Industrial Companies

International Takeover Laws and Corporate Cash Holdings

International Takeover Laws and Corporate Cash Holdings

Green Credit Policy and Corporate Cash Holdings: Evidence from China

Green Credit Policy and Corporate Cash Holdings: Evidence from China

Economic Policy Uncertainty, Institutional Environments, and Corporate Cash Holdings

Economic Policy Uncertainty, Institutional Environments, and Corporate Cash Holdings

Does accounting quality predict corporate cash holdings

Does accounting quality predict corporate cash holdings

Board Diversity and Marginal Value of Corporate Cash Holdings

Board Diversity and Marginal Value of Corporate Cash Holdings

COVID-19 and Precautionary Corporate Cash Holdings: Evidence from Japan

COVID-19 and Precautionary Corporate Cash Holdings: Evidence from Japan

What Determine the Corporate Cash Holdings? A Cross Country Analysis

What Determine the Corporate Cash Holdings? A Cross Country Analysis

Does accounting quality predict corporate cash holdings

Does accounting quality predict corporate cash holdings

Labor Protection and the Dynamics of Corporate Cash Holdings

Labor Protection and the Dynamics of Corporate Cash Holdings