Environmental uncertainty and corporate cash holdings: The moderating role of <scp>CEO</scp> ability

Magerakis, Efstathios; Habib, Ahsan

doi:10.1111/irfi.12355

Cited by 18 publications

(11 citation statements)

References 148 publications

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“…First, the results from Columns 1 and 2 reveal that the estimate on managerial ability ( MA ) is positive and significant, confirming its importance in explaining the firm-level cash. This finding is in accordance with the results from Magerakis and Habib (2021). Also, the results in Column 1 show that the coefficient on strategy index ( MD ) is positive and significant at the 1% level ( β = 0.004, t -stat.…”

Section: Resultssupporting

confidence: 90%

The importance of managerial discretion on managerial ability–firm cash holding nexus

Magerakis

2022

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PurposeThis paper examines the role of managerial discretion in the relation between managerial ability on the level of corporate cash.Design/methodology/approachConjoining the upper echelons theory's premises and the theoretical framework of cash holdings, we posit that the managerial ability's effect on cash policy varies with managerial discretion using firm-level data. To test the empirical prediction, we employ a linear regression model with fixed effects with a sample of US listed firms from 1980 to 2016.FindingsThe findings reveal that the positive association between the ability of chief executive officers and corporate cash savings is weakened by firm-level managerial discretion. The results are robust to various additional analyses, namely lagged independent variables regression, reduced form regression and granger causality test. Overall, the findings are generally consistent with the cash holding motives yielding transaction and precautionary demand for money. However, our findings also shed light on whether managerial discretion moderates or exacerbates agency problems related to top executives' cash holding policies.Originality/valueThis work's distinct characteristic is the investigation of the joint effect of managerial talent and discretion on a firm's cash holding, which remains unexplored in the literature.

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Section: Resultssupporting

confidence: 90%

The importance of managerial discretion on managerial ability–firm cash holding nexus

Magerakis

2022

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“…The new EPL has the potential to increase the level of heavypolluting firms' cash holdings for several reasons. First, the stringency of environmental regulation results in heightened uncertainty (Lanoie et al, 2008), thus positively affecting corporate cash holdings (Magerakis and Habib, 2021). Stringent environmental regulation induced by the new EPL increases the possibility of heavy-polluting firms being suspended or even forced to close when they fail to comply with environmental protection laws and regulations.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…On the other hand, heightened uncertainty increases financial constraints, thereby, forcing firms to hoard cash to buffer them against contingencies (Campello et al, 2010). Firms hoard cash to diminish the possibility of distress, sustain operational efficiency, and enhance profitability (Han and Qiu, 2007;Phan et al, 2019;Magerakis and Habib, 2021). According to the precautionary motive, heavy-polluting firms are more likely to stockpile cash in response to heightened environmental uncertainty 2 stemming from environmental regulation.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…The limited access to bank loans and government subsidies brings about severe financial constraints for heavy-polluting firms. Thus, the increase in heavy-polluting firms' environmental uncertainty and financial constraints stemming from the new EPL, implies an increment in the level of cash holdings for higher levels of hedging needs (Opler et al, 1999;Davydova and Sokolov, 2014;Magerakis and Habib, 2021).…”

Section: Introductionmentioning

confidence: 99%

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

Zhang

Cheng

2022

Front. Environ. Sci.

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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.

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“…Environmental uncertainty means that environmental conditions are unpredictable because of large and rapid changes (Darvishmotevali et al, 2020;Magerakis & Habib, 2021). Ezzamel (1990) divided environmental uncertainty into two dimensions: complexity and dynamics.…”

Section: Literature Review and Hypothesis Development Environmental U...mentioning

confidence: 99%

Environmental Uncertainty and Performance of Chinese Public Universities

Wen¹,

Ong²,

Daud³

et al. 2023

IJARBSS

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This study mainly explored the relationship between environmental uncertainty and the performance of Chinese public universities. Data were collected through questionnaires. The census sampling method was employed to select Chinese public universities as samples. Data from 315 valid questionnaire responses were analyzed using partial least squares structural equation modeling (PLS-SEM). It was found environmental uncertainty can not impact on university performance. Apart from contributing to theories and literature, this research provided empirical insights for public universities, the public sector and other stakeholders in developing countries, particularly China. The results lead leaders to attach importance to actively improve the performance of public universities. It was also pointed out that public universities and businesses have different attitudes towards environmental uncertainty. The nature of Chinese public universities is different from that of enterprises. Therefore, environmental uncertainty cannot directly affect performance.

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Environmental uncertainty and corporate cash holdings: The moderating role of CEO ability

Cited by 18 publications

References 148 publications

The importance of managerial discretion on managerial ability–firm cash holding nexus

The importance of managerial discretion on managerial ability–firm cash holding nexus

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

Environmental Uncertainty and Performance of Chinese Public Universities

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