Foreign institutional ownership and corporate cash holdings: Evidence from emerging economies

Loncan, Tiago

doi:10.1016/j.irfa.2018.12.003

Cited by 65 publications

(48 citation statements)

References 79 publications

(123 reference statements)

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“…DIV coefficient is positive and significant at 5% level in both models. This finding supports the rationale that dividend-paying firms hold more cash than non-dividend-paying firms to avoid a situation in which they are short of cash to support their dividend payments (Loncan, 2019). CFOVOL coefficient is positive and in line with the existing literature that predict firms to hold more cash for precautionary purposes in case of high volatility of cash flow.…”

Section: Baseline Resultssupporting

confidence: 86%

Does volatility of trade receivables affect corporate cash holdings Empirical evidence from Turkey

Adiguzel¹

2019

Pressacademia

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Purpose -This study aims to analyze the direct impact of trade receivables volatility on corporate cash holdings. Unlike previous studies, the present paper focuses on variability of a firm's investment in trade credit which proxies instability of a firm's trade receivables policy. Methodology -The sample is composed of 330 Turkish industrials listed on Borsa Istanbul from 2000 to 2017. The model is estimated via system GMM (Generalized Method of Moments) to account for the partial adjustment process towards the target cash level and also to address the potential endogeneity issue related with volatility of trade receivables. Findings-Estimations establish a significant negative effect of trade receivables volatility on cash holdings. The results are robust to alternative definitions of cash holdings and trade receivables volatility. Conclusion -The evidence presented in this study suggests that instability of trade receivables policy weakens liquidity position of firms.

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Section: Baseline Resultssupporting

confidence: 86%

Does volatility of trade receivables affect corporate cash holdings Empirical evidence from Turkey

Adiguzel¹

2019

Pressacademia

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“…Dudley and Zhang () suggest that agency hypothesis predicts that shareholders will demand firms to disgorge more cash in countries with lower level of societal trust. Loncan () finds that mitigation of agency conflicts and reduction of financing constraints can be associate with the negative impact of foreign institutional ownership in cash holding, using a sample of firms in emerging economies.…”

Section: Approaches Regarding Cash Holdings: a Brief Overviewmentioning

confidence: 99%

What Do We Know About Corporate Cash Holdings? A Systematic Analysis

Cruz¹,

Kimura²,

Sobreiro³

2019

J Corp Accounting Finance

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Cash holdings play an important role at the heart of firms' policies. Researchers have devoted considerable attention to the dramatic increase in cash reserves despite alternative instruments such as debt, derivatives, and credit lines. The finance literature discusses the antecedents and determinants of cash holdings as well as the different reasons for firms to hold cash. In this paper, we present a systematic literature review of cash holdings in the finance field. The major studies in this area are classified and coded, and a research agenda and recommendations that may advance the field are discussed. © 2019 Wiley Periodicals, Inc.

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“…The inflow of equity ownership by foreign institutional investors (FII) is associated with subsequent changes in corporate governance structure, particularly in countries with weaker investor protection (Aggarwal et al, 2011). Considering their positive governance role, recently researchers investigated the effect of FII on different corporate policies such as investment policy (Bena et al, 2017;Cella, 2020), cash management policy (Loncan, 2019) and dividend policy (Cao et al, 2017).…”

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

“…Contrarily, the presence of FII improves corporate governance, mitigates agency cost and the risk of managerial expropriation (Huang and Zhu, 2015;Loncan, 2019). Loncan (2019) studied whether FII affect the level of cash holdings in emerging markets. Rather than focusing on the direct effect of FII on the level of cash holdings, this study focuses on the marginal effect of cash and dividend on firm's value in the presence of FII.…”

Section: Introductionmentioning

confidence: 99%

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Foreign institutional investors and the contribution of cash and dividend to firm's value

Karim

Ilyas

2020

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PurposeThe aim of this study is to investigate the effect of foreign institutional investors (FII) on the contribution of cash and dividend to firm's value in the context of Japan.Design/methodology/approachThis study used a sample of 1,929 nonfinancial firms listed in Tokyo Stock Exchange in the period from 2002 to 2016. For data analysis, pooled OLS regression with firm and year fixed effect is applied. Further, the p-value of difference is used to test the null hypothesis of equal coefficients.FindingsThe findings depict that cash holdings contribute more to firm's value when ownership by FII is high. Contrarily, dividends contribute more to firm's value when ownership by FII is low. The results remain consistent after using excess cash holdings instead of cash holdings and after re-estimating the main regression model in the presence of top 30% and bottom 30% ownership level.Research limitations/implicationsThis study is limited to Japanese nonfinancial sector. The results implied that firms where the probability of managerial agency cost and expropriation of cash is high, the presence of FII mitigates the agency cost and positively influences the contribution of cash to firm's value. Overall, this research highlighted the disciplinary and monitoring role of FII in Japan.Originality/valueThis study provides new insights on the monitoring and governance role of foreign institutions, showing that FII promote better cash management and utilization, which significantly affects the contribution of cash holdings to firm's value.

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Foreign institutional ownership and corporate cash holdings: Evidence from emerging economies

Cited by 65 publications

References 79 publications

Does volatility of trade receivables affect corporate cash holdings Empirical evidence from Turkey

Does volatility of trade receivables affect corporate cash holdings Empirical evidence from Turkey

What Do We Know About Corporate Cash Holdings? A Systematic Analysis

Foreign institutional investors and the contribution of cash and dividend to firm's value

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