Corporate Cash Holdings and Financial Constraints —An Analysis Based on Data on China at Company Level after the Global Financial Crisis

2019 ◽  
Vol 56 (7) ◽  
pp. 1490-1503
Author(s):  
Hong Zhang ◽  
Yuyao Zhang ◽  
Shimin Zhou ◽  
Yanmin He
Keyword(s):  
Financial Crisis ◽  
Financial Constraints ◽  
Global Financial Crisis ◽  
Cash Holdings ◽  
The Global Financial Crisis ◽  
Corporate Cash Holdings

Foreign ownership, state ownership and cash holdings under the global financial crisis: evidence from the emerging market of Vietnam

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Quynh Nga Nguyen Thi ◽  
Quoc Trung Tran ◽  
Hong Phat Doan
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Cash Holdings ◽  
Foreign Ownership ◽  
State Ownership ◽  
Exogenous Shock ◽  
Content Type ◽  
The Global Financial Crisis ◽  
Corporate Cash Holdings

PurposeThis paper investigates how the global financial crisis changes the effects of state ownership and foreign ownership on corporate cash holdings in an emerging market.Design/methodology/approachWe employ an interactive term between state ownership (foreign ownership) and a crisis dummy to analyze how the global financial crisis determines the effect of state ownership (foreign ownership) on corporate cash holdings.FindingsWith a research sample including 5,493 observations from 621 listed firms over the period 2007–2017, we find that state ownership (foreign ownership) is negatively (positively) related to corporate cash holdings and the effect of state ownership (foreign ownership) is stronger (weaker) during the crisis period. Moreover, the increase in the effect of state ownership is larger in financially unconstrained firms.Originality/valuePrior research shows that the effects of state ownership and foreign ownership on corporate cash holdings in emerging markets are still debatable. This paper extends this line of research by investigating how the global financial crisis – an exogenous shock – changes these effects.

scholarly journals Firm Performance, Financial Constraints, and Dual-Class Share Structure

2021 ◽  
Author(s):  
◽  
Fatematuz Tamanna Ahamed
Keyword(s):  
Firm Performance ◽  
Financial Crisis ◽  
Financial Constraints ◽  
Global Financial Crisis ◽  
Financial Constraint ◽  
The Global Financial Crisis ◽  
Dual Class ◽  
Share Structure ◽  
The Impact ◽  
The Relationship

<p><b>This thesis addresses two aspects of financial constraints focusing, firstly, on the impact of financial constraints on firm performance and, secondly, on the impact of dual-class share structure on financial constraints. The first issue has been addressed in a large number of research studies, but the results are mixed. This study, therefore, conducts a meta-analysis of those earlier studies to provide a summary view of the results which, in contrast to narrative reviews of the empirical literature, provides an objective overview. The second issue examines the impact of dual-class share structures on financial constraints. The period of the global financial crisis is used to test the impact of the state of the economy on that relationship. To examine the impact of financial constraints on firm performance, 26 empirical studies with 189 effect sizes representing listed firms have been analysed. The study finds that overall there is a positive relationship between financial constraints and firm performance. The study also shows that the set of market-based measures of firm performance has a significant negative impact on the relationship, compared with the set of accounting-based measures. In terms of the financial constraints measure, the set of external financial constraints measures have a positive and highly significant impact on the relationship. The meta-regression analysis suggests that the choice of measure, regional difference, journal quality and publication status all have a significant impact on the relationship, and explain the variation in the association.</b></p> <p>To examine the impact of dual-class share structures on financial constraints the study analyses a sample of non-financial US firms over the period 2002-2018. Share structure is measured by the existence of a dual-class structure and also by excess voting rights and the proximity of the superior class shareholders in such structures. The study also shows that if financial constraints are measured by the WW index, irrespective of how dual-class share structure is measured, it increases the level of financial constraints. Similar results are obtained where financial constraints are measured by the KZ and SA indexes, except where dual-class share structure is measured by the proximity of superior class shareholders. The study also finds that if financial constraints are measured by the WW index, dual-class had a reduced impact during the period of the global financial crisis, thus, providing support for the propping theory. However, if financial constraint is measured by the SA index, dual-class share structure appears to have an increased impact during the GFC years. </p> <p>Among the additional tests, the HM index has been used as a measure of financial constraints, and the findings show that the impact of dual-class structures on financial constraints appears to be driven by their effect on debt constraints. The study also shows that firm age moderates the impact of dual-class share structures if financial constraints are measured by the WW index. The KZ, WW, and SA indexes are based on firm characteristics and, therefore, the study also tests for an impact of dual-class structures when financial constraint is measured by a text-based index, the BLM index. However, the results do not provide evidence of an impact in that case.</p>

Carbon risk and firm performance: Evidence from a quasi-natural experiment

2017 ◽  
Vol 43 (1) ◽  
pp. 65-90 ◽  
Author(s):  
Justin Hung Nguyen
Keyword(s):  
Firm Performance ◽  
Financial Crisis ◽  
Financial Performance ◽  
Financial Constraints ◽  
Natural Experiment ◽  
Global Financial Crisis ◽  
Negative Association ◽  
Exogenous Shock ◽  
The Global Financial Crisis ◽  
The Impact

This article examines the effect of carbon risk on firm performance, exploiting the Australia ratification of Kyoto Protocol in December 2007 as an exogenous shock. The article finds that polluters, firms in highest-emitting industries, experience a reduction in financial performance relative to controlling non-polluters subsequent to the ratification, and the effect is more pronounced among financially constrained firms. The results are robust to various definitions of polluters, measures of financial constraints, falsification tests on the timing of the Kyoto adoption and the impact of the Global Financial Crisis. The evidence suggests a negative association between carbon risk and firm performance.

Uncertainty avoidance culture, cash holdings and financial crisis

2020 ◽  
Vol 28 (4) ◽  
pp. 549-566
Author(s):  
Quoc Trung Tran
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Cash Holdings ◽  
Uncertainty Avoidance ◽  
Cultural Dimension ◽  
Exogenous Shock ◽  
Content Type ◽  
Crisis Period ◽  
The Global Financial Crisis ◽  
The Impact

Purpose This paper aims to investigate how the global financial crisis affects the relationship between uncertainty avoidance culture and corporate cash holdings. Design/methodology/approach This study develops a research model in which cash holdings ratio is a function of post-crisis period dummy, Hofstede’s cultural dimension of uncertainty avoidance, their interactive term and control variables. The research sample includes 188,264 observations from 26,509 firms incorporated in 44 countries between 2003 and 2016. Findings This study finds that the effect of uncertainty avoidance culture on firm cash holdings is stronger in the post-crisis period from 2008 to 2016. This effect is stronger for financially constrained firms. In addition, the research findings show that uncertainty avoidance culture is more effective in cash–cash flow sensitivity over the post-crisis period. Originality/value Prior studies show that uncertainty avoidance culture positively affects corporate cash reserves. However, the authors only examine the effect of uncertainty avoidance culture on cash holdings in a static environment. This paper investigates this effect under the impact of the global financial crisis – an exogenous shock.

scholarly journals Firm Performance, Financial Constraints, and Dual-Class Share Structure

2021 ◽  
Author(s):  
Fatematuz Tamanna Ahamed
Keyword(s):  
Firm Performance ◽  
Financial Crisis ◽  
Financial Constraints ◽  
Global Financial Crisis ◽  
Financial Constraint ◽  
The Global Financial Crisis ◽  
Dual Class ◽  
Share Structure ◽  
The Impact ◽  
The Relationship

<p><b>This thesis addresses two aspects of financial constraints focusing, firstly, on the impact of financial constraints on firm performance and, secondly, on the impact of dual-class share structure on financial constraints. The first issue has been addressed in a large number of research studies, but the results are mixed. This study, therefore, conducts a meta-analysis of those earlier studies to provide a summary view of the results which, in contrast to narrative reviews of the empirical literature, provides an objective overview. The second issue examines the impact of dual-class share structures on financial constraints. The period of the global financial crisis is used to test the impact of the state of the economy on that relationship. To examine the impact of financial constraints on firm performance, 26 empirical studies with 189 effect sizes representing listed firms have been analysed. The study finds that overall there is a positive relationship between financial constraints and firm performance. The study also shows that the set of market-based measures of firm performance has a significant negative impact on the relationship, compared with the set of accounting-based measures. In terms of the financial constraints measure, the set of external financial constraints measures have a positive and highly significant impact on the relationship. The meta-regression analysis suggests that the choice of measure, regional difference, journal quality and publication status all have a significant impact on the relationship, and explain the variation in the association.</b></p> <p>To examine the impact of dual-class share structures on financial constraints the study analyses a sample of non-financial US firms over the period 2002-2018. Share structure is measured by the existence of a dual-class structure and also by excess voting rights and the proximity of the superior class shareholders in such structures. The study also shows that if financial constraints are measured by the WW index, irrespective of how dual-class share structure is measured, it increases the level of financial constraints. Similar results are obtained where financial constraints are measured by the KZ and SA indexes, except where dual-class share structure is measured by the proximity of superior class shareholders. The study also finds that if financial constraints are measured by the WW index, dual-class had a reduced impact during the period of the global financial crisis, thus, providing support for the propping theory. However, if financial constraint is measured by the SA index, dual-class share structure appears to have an increased impact during the GFC years. </p> <p>Among the additional tests, the HM index has been used as a measure of financial constraints, and the findings show that the impact of dual-class structures on financial constraints appears to be driven by their effect on debt constraints. The study also shows that firm age moderates the impact of dual-class share structures if financial constraints are measured by the WW index. The KZ, WW, and SA indexes are based on firm characteristics and, therefore, the study also tests for an impact of dual-class structures when financial constraint is measured by a text-based index, the BLM index. However, the results do not provide evidence of an impact in that case.</p>

scholarly journals How optimal cash changed by the global financial crisis? A multi-country analysis

2020 ◽  
Vol 9 (2) ◽  
pp. 114 ◽  
Author(s):  
Hasan Tekin
Keyword(s):  
Financial Crisis ◽  
Financial Constraints ◽  
Global Financial Crisis ◽  
Empirical Results ◽  
Country Analysis ◽  
Precautionary Motive ◽  
The Global Financial Crisis ◽  
The Impact

This article investigates the impact of the global financial crisis 2007-2009 (GFC) as well as financial constraints and governance on optimal cash decisions. Using 14,885 sample firms from eleven countries, empirical results show that constrained firms have a faster cash adjustment than unconstrained firms as confirmed by precautionary motive. Contrary to agency motive, firms in weak-governed countries have a slower cash adjustment than those in well-governed countries before the GFC. However, this picture changes after the GFC. Specifically, they increase their cash adjustments, whereas those in well-governed countries decrease their cash adjustments as supported by agency motive. Overall, optimal cash policy differs following the GFC across financial constraints and governance.

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