Investor protection and cash holdings: Evidence from US cross-listing

Huang, Ying; Elkinawy, Susan; Jain, Pankaj

doi:10.1016/j.jbankfin.2012.10.021

Cited by 97 publications

(54 citation statements)

References 37 publications

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“…A number of studies (e.g., Dittmar et al, 2003;Hoberg, Phillips, & Prabhala, 2014) show that the cash level declines when capital expenditures increase. On the other hand, Opler et al (1999) and Huang, Elkinawy, and Jain (2013) expenditures scaled by total assets, in the model, and predict that the sign of the coefficient estimate β 6 could be either negative or positive.…”

Section: Other Main Variablesmentioning

confidence: 91%

“…A number of studies (e.g., Dittmar et al, ; Hoberg, Phillips, & Prabhala, ) show that the cash level declines when capital expenditures increase. On the other hand, Opler et al () and Huang, Elkinawy, and Jain () document a positive coefficient for capital expenditures doubting the direction of the association . We include capital expenditures ( CAPX) , estimated as capital expenditures scaled by total assets, in the model, and predict that the sign of the coefficient estimate

β_{6}

could be either negative or positive.…”

Section: Model Specification Sample Selection and Measurement Of Vamentioning

confidence: 97%

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How friends with money affect corporate cash policies? The international evidence

Javakhadze¹,

Rajkovic

2018

Euro Fin Management

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We examine the association between managerial social capital and the cash flow sensitivity of cash in an international setting. We find that social capital reduces the marginal propensity to save cash out of cash flows. This association is stronger for more financially constrained firms, firms with high hedging needs, and firms with more uncertain cash flows. The effect of social capital is partially moderated by the extent of legal protection standards and financial development. We also show that social capital matters for valuation. These findings are robust to alternative model specifications, alternative variable measurement, and tests for endogeneity.

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Section: Other Main Variablesmentioning

confidence: 91%

β_{6}

could be either negative or positive.…”

Section: Model Specification Sample Selection and Measurement Of Vamentioning

confidence: 97%

How friends with money affect corporate cash policies? The international evidence

Javakhadze¹,

Rajkovic

2018

Euro Fin Management

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“…Opler et al (1999) have analyzed a trade-off theory of cash (according to which firms balance the benefits and costs of holding cash). The later literature highlights the benefits and costs of cash associated with financing corporate investments (Acharya et al, 2007;Almeida et al, 2004;Bates et al, 2009;Denis and Sibilkov, 2010;Duchin et al, 2010;Harford et al, 2014) and agency problems (e.g., for the US firms Dittmar and Mahrt-Smith, 2007;Dittmar et al, 2003;Harford et al, 2008;Jensen, 1986;Pinkowitz et al, 2006;and Huang et al, 2013).…”

Section: Accepted Manuscriptmentioning

confidence: 99%

Multinationals and cash holdings

Fernandes

Gönenç

2016

Journal of Corporate Finance

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This study examines the relationship between cash holdings and the level of multinationality for a large international sample of firms from 40 countries. We consider two dimensions of diversification, geographical and industrial, and find a direct negative relation between both geographic and industrial diversification and cash holdings. This finding is consistent with the diversification argument that multinationals' headquarters plan their investment and cash needs in an efficient way across geographically diversified operations. We further examine whether there is a trade-off between two diversification strategies. The evidence shows that the effect of industrial diversification is negligible once firms are geographically diversified. By performing country-level tests, we also document some new evidence of international differences for the impacts of tax systems, investor protection, political stability, stock market development, economic size and growth, and national culture on the separate and joint effects of geographic and industrial diversifications.

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“…Iskandar‐Datta and Jia () corroborate this intuition and, using an international sample of firms, find that firms overinvest when shareholder protection is low, leading to lower cash holdings. Moreover, Huang et al () find that firms that cross‐list in the United States increase cash holdings and hold more cash than matched non‐cross‐listed firms. The authors find this effect to be stronger for firms from economies with poor shareholder protection.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

“…When agency conflict levels are high, shareholders prefer to keep low levels of cash to avoid bad managerial decisions. Several studies suggest shareholders discount the value of $1 by at least 10% when agency conflict levels are high (Dittmar & Mahrt-Smith, 2007;Frésard & Salva, 2010;Huang, Elkinawy, & Jain, 2013;Kalcheva & Lins, 2007;Pinkowitz et al, 2006), thus indirectly affecting cash holdings policy.…”

Section: Managerial Entrenchmentmentioning

confidence: 99%

Investor protection, managerial entrenchment, and cash holdings: Cross‐country evidence

Martins

2019

International Finance

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We investigate whether investor protection (i.e. shareholder protection and creditor rights) is associated with how entrenched managers set corporate cash holdings. Our sample covers more than 6,000 firms from 29 countries (roughly 16,000 observations during 2010–2013). We find that the entrenchment–cash holdings association is sensitive to the level of shareholder protection but not to the level of creditor rights. Moreover, we find that the way shareholder protection shapes this association depends upon how managers become entrenched. When managers become entrenched through ownership, shareholders consent to their preferences to hold more cash, whereas, when managers become entrenched through CEO duality, shareholders force them to disgorge cash. We interpret our findings as evidence that shareholders agree to increase cash when managers are aligned with them by ownership but prefer to decrease cash when they are not aligned, whereas creditors do not influence entrenched managers’ cash holdings decisions.

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Investor protection and cash holdings: Evidence from US cross-listing

Cited by 97 publications

References 37 publications

How friends with money affect corporate cash policies? The international evidence

How friends with money affect corporate cash policies? The international evidence

Multinationals and cash holdings

Investor protection, managerial entrenchment, and cash holdings: Cross‐country evidence

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