The impact of internationalization degree on cash levels: Evidence from Latin America

Manoel, Aviner Augusto Silva; Moraes, Marcelo Botelho da Costa

doi:10.1016/j.ibusrev.2021.101949

Cited by 4 publications

(7 citation statements)

References 31 publications

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“…Cash reserves allow companies to take advantage of their valuable investment opportunities that would otherwise be forgone (Denis & Sibilkov, 2010; Keynes, 1936; Manoel & Moraes, 2022b; Martínez‐Sola et al, 2013; Myers & Majluf, 1984; Opler et al, 1999), especially when current cash flows are not enough (Drobetz et al, 2010) and for the firms that face greater financing constraints (Denis & Sibilkov, 2010; Faulkender & Wang, 2006; Manoel et al, 2017). Additionally, a cash buffer enables companies to invest without raising external finance at high transaction costs (Kim et al, 1998; Martínez‐Sola et al, 2013) and liquidate assets to make payments (Opler et al, 1999).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…Cash holdings constitute a considerable portion of firms' total assets and have important implications for shareholders' value and for several strategic decisions (Beuselinck & Du, 2017; Chen, 2008; Deloof et al, 2020; Dittmar & Mahrt‐Smith, 2007; Faulkender & Wang, 2006; Harford et al, 2008; Manoel & Moraes, 2022a; Martínez‐Sola et al, 2013; Masulis et al, 2009; Opler et al, 1999; Pinkowitz & Williamson, 2007). The literature on cash management has recently attracted much attention from both academia and the press, especially driven by the large increase in cash trapped overseas by U.S. multinational corporations (MNCs) due to repatriation tax laws (Beuselinck & Du, 2017; Faulkender et al, 2019; Graham & Leary, 2018; Harford et al, 2017; Manoel & Moraes, 2022b).…”

Section: Introductionmentioning

confidence: 99%

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The market value of cash and the creation of high‐governance listings of voluntary adoption: Evidence from the Brazilian stock exchange

Manoel

Moraes

Pundrich

2022

Corporate Governance

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Research Question/Issues: In this article, we analyze whether the initiative of a domestic stock exchange that designed three high-governance listings of voluntary adoption, in addition to maintaining its traditional listing, can mitigate managers' ability to expropriate cash. As a result of the reduction in improper cash diversion in firms with higher disclosure and corporate governance standards, we hypothesize that investors place a higher value on cash in the firms that voluntarily migrate to the premium listing.

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Section: Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The market value of cash and the creation of high‐governance listings of voluntary adoption: Evidence from the Brazilian stock exchange

Manoel

Moraes

Pundrich

2022

Corporate Governance

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“…Following the literature on the topic (Dittmar & Mahrt-Smith, 2007;Opler et al, 1999), we removed financial companies and public utility firms from the final sample, as the cash holdings policies of these companies are influenced by statutory capital requirements and other government regulations. Finally, to mitigate any concern about survival bias, we included survivor and non-survivor companies in the sample with information available during the analysis period (Manoel & Moraes, 2021b). After imposing these restrictions, the final sample used consists of an unbalanced panel with 293 non-financial companies, totaling 1,839 observations.…”

Section: Sample Descriptionmentioning

confidence: 99%

“…Analyzing the value that shareholders attribute to companies' cash holdings is relevant, especially in less developed markets, since maintaining assets in the form of cash and cash equivalents is costly, given that part of these resources could be allocated in other more profitable investments (Kim et al, 1998;Manoel & Moraes, 2021b;Opler et al, 1999). In addition, firms allocate a substantial part of their assets in cash and the expropriation of these resources has a devastating impact on shareholders' well-being (Bates et al, 2018;Dittmar & Mahrt-Smith, 2007;Manoel & Moraes, 2021a;Pinkowitz et al, 2006).…”

Section: Introductionmentioning

confidence: 99%

Accounting Conservatism and the Market Value of Cash Holdings in Brazil

Manoel¹,

Moraes²

2022

RBGN

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Purpose -To analyze the relationship between conservative accounting policies and the value that shareholders attribute to the cash holdings of publicly-traded companies in Brazil. Theoretical framework -Cash holdings are the most vulnerable asset to the agent's opportunistic actions. Part of the discussion in the literature on the topic concerns the possible mechanisms to align the interests between the agent and principal. However, little is known on whether accounting conservatism, as a governance mechanism and important attribute of financial reports, can mitigate part of the agency problems related to the use of cash holdings. Design/methodology/approach -To analyze the market value of cash holdings we used the Pinkowitz, Stulz, and Williamson (2006) regression model. An accruals-based measure was used as a proxy for accounting conservatism. Findings -The evidence obtained indicates a positive association between conservative accounting policies and the market value of cash holdings. In general, the empirical evidence suggests that shareholders attribute a higher market value to the cash holdings of conservative companies. Practical & social implications of research -Presenting another benefit associated with accounting conservatism also helps in the discussion on conservatism in financial reports. This is relevant given the current debate on the merits of neutrality versus conservatism as a desirable characteristic of accounting numbers. Originality/value -This study contributes to the literature by demonstrating that conservative accounting policies have the potential to provide organizations with real economic benefits, serving as a governance mechanism that reduces the agency problems associated with the use of cash.

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“…Considering that capital markets do not work as well as we typically assume they do, then companies' decisions regarding their cash holdings are indeed relevant to firm value (Keynes, 1936; Opler et al, 1999; Pinkowitz & Williamson, 2007; Almeida et al, 2014; Manoel et al, 2022). In this regard, the literature on cash management points out that ensuring that organizations have enough cash to carry out their strategic plans, as well as to maintain their daily operations, is one of the most important financial decisions that managers make in a world with imperfect capital markets (Pinkowitz & Williamson, 2007; Denis & Sibilkov, 2010; Drobetz et al, 2010; Almeida et al, 2014; Manoel & Moraes, 2022b).…”

Section: Introductionmentioning

confidence: 99%

The effects of financial constraints on the market value of cash in a mandatory dividend context

2022

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This article aims to shed light on the effects of financial constraints on the value shareholders attribute to cash holdings in firms listed on the Brazilian stock exchange, where corporate law determines that publicly listed companies set aside part of their annual profits for dividend payments. While prior empirical literature provides evidence that cash holdings are more valuable for financially constrained companies than for their unconstrained counterparts, we cannot support the hypothesis that the market value of cash increases as obtaining access to external funds becomes more difficult. Our analysis also reveals that constrained companies do not hold significantly higher cash savings than their unconstrained peers. This last result, in turn, is not in line with the precautionary motive for having cash. Moreover, although the principal argument for adopting mandatory dividend rules in Brazil was to increase the protection of minority shareholders, we observe that the contribution of cash holdings to firm value is still small in Brazil, especially in dual‐class companies, because investors expect cash holdings to be partly consumed as private benefits due to the presence of significant agency problems. This research is relevant because it serves as an additional step in understanding how a legal mechanism established by a government to protect investors affects the contribution of cash holdings to firm value. Governments that intend to adopt mandatory dividend rules to safeguard the cash‐flow rights of minority shareholders can use our findings to make better decisions regarding whether to enforce compulsory dividend payments.

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The impact of internationalization degree on cash levels: Evidence from Latin America

Cited by 4 publications

References 31 publications

The market value of cash and the creation of high‐governance listings of voluntary adoption: Evidence from the Brazilian stock exchange

The market value of cash and the creation of high‐governance listings of voluntary adoption: Evidence from the Brazilian stock exchange

Accounting Conservatism and the Market Value of Cash Holdings in Brazil

The effects of financial constraints on the market value of cash in a mandatory dividend context

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