Bank relations, cash holdings, and firm value: evidence from Japan

2005 ◽  
Vol 28 (4) ◽  
pp. 61-73 ◽  
Author(s):  
Qi Luo ◽  
Toyohiko Hachiya
Keyword(s):  
Empirical Evidence ◽  
Firm Value ◽  
Cash Holdings ◽  
Cash Holding ◽  
Agency Conflicts ◽  
Japanese Firms

This paper tests two views of bank’s role for Japanese firms. The views are confronted with the empirical evidence, allowing them to compete to explain firm’s cash holding decisions and the implication of cash holdings on firm value. We find that firms with closer bank relations hold less cash, but some of them are over‐borrowing. Our results show that banks do not monitor their client firms and are unlikely to push the managers of the firms to take efficient actions on maximizing firm value. We discover that cash holdings cause more severe agency conflicts for the firms who have the closer relations with the banks.

scholarly journals The Effect of Optimal Cash and Deviation from Target Cash on the Firm Value: Empirical Study in Indonesian Firms

2019 ◽  
Vol 10 (1) ◽  
pp. 1-13
Author(s):  
R Heru Kristanto HC ◽  
Mamduh M Hanafi ◽  
Wayan Nuka Lantara
Keyword(s):  
Corporate Governance ◽  
Empirical Study ◽  
Firm Value ◽  
Fixed Effects ◽  
Cash Holdings ◽  
Cash Holding ◽  
Fixed Effects Model ◽  
Publicly Traded ◽  
Dynamic Panel ◽  
Panel Fixed Effects

The aim of this paper is to examine the effect of cash, optimal cash holding, deviation from target cash (the target adjustment model) on the firm value. This research uses a sample of Indonesian publicly traded firms for the period 2001-2017 (3,349 observation). This paper uses a dynamic panel fixed effects model to estimate optimal cash holdings. Hypothesis testing uses GLS fixed effect and interaction effect uses regression moderated analysis. Research finds that: first, cash, optimal cash, and deviation from target cash have an effect on the firm value. Second, corporate governance moderates the effect of cash, optimal cash, and deviation from target cash on the firm value. Third, investment positively moderates the effect of cash on the firm value. Investment negatively moderates the effect of optimal cash, deviation from target cash on the firm value. Debt negatively moderates the effect of cash, optimal cash on the firm value. Debt positively moderates the effect of deviation from target cash on the firm value. 

scholarly journals Agency conflicts, firm value, and monitoring mechanisms: An empirical evidence from Indonesia

2020 ◽  
Vol 8 (1) ◽  
pp. 1822018
Author(s):  
Faisal Faisal ◽  
M. Shabri Abd Majid ◽  
A. Sakir
Keyword(s):  
Empirical Evidence ◽  
Firm Value ◽  
Agency Conflicts

scholarly journals Do Firm-Bank Relationships Affect Corporate Cash Holdings?

2017 ◽  
pp. 5-20
Author(s):  
Andriy Tsapin
Keyword(s):  
Empirical Evidence ◽  
Financial Constraints ◽  
Cash Holdings ◽  
Agency Conflicts ◽  
Main Bank ◽  
Cash Reserves ◽  
The Impact ◽  
The Relationship ◽  
Corporate Cash Holdings

This paper explores the impact of firm-bank relationships on corporate cash holdings using a sample of more than 4,000 Ukrainian companies over the period from 2008 to 2015. The empirical evidence suggests that the duration of the relationship and the presence of multiple bank relationships affect corporate cash holdings. Specifically, an increase in the length of a bank’s relationship with a main bank initially reduces corporate cash holdings but the effect turns positive due to the hold-up problem when the relationship matures. We also observe that companies with a greater number of bank relationships tend to hold more cash reserves, whereas more competition among banks allows firms to hold less cash. Additionally, we document that firm-bank relationships are important in helping firms resolve agency conflicts and facilitate reducing a firm’s financial constraints.

Corporate Governance, Cash Holdings, and Firm Value: Evidence from Japan

2005 ◽  
Vol 08 (04) ◽  
pp. 613-636 ◽  
Author(s):  
Qi Luo ◽  
Toyohiko Hachiya
Keyword(s):  
Corporate Governance ◽  
Significant Role ◽  
Firm Value ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Agency Problems ◽  
Insider Ownership ◽  
Negative Relation ◽  
Japanese Firms ◽  
The Impact

This paper presents evidence on cash holdings for Japanese firms listed on the Tokyo Stock Exchange, focusing on the impact of corporate governance factors in cash holdings and the implication of cash holdings to firm value. We find that insider ownership and bank relations of firms play a significant role in determining cash holdings. Our results indicate that foreign stockholders select profitable firms to invest, and these firms have higher levels of cash. We document evidence that cash holdings lead to agency problems and impact firm value negatively, and governance characteristics affect the negative relation between cash holdings and firm value.

Corporate cash holdings and their implications on firm value in family and founder firms

2012 ◽  
Vol 9 (2) ◽  
pp. 257-273 ◽  
Author(s):  
James Lau ◽  
Joern H. Block
Keyword(s):  
Adverse Selection ◽  
Interaction Effect ◽  
Firm Value ◽  
Family Firms ◽  
Cash Holdings ◽  
Agency Cost ◽  
Economic Incentives ◽  
Positive Interaction ◽  
Superior Knowledge ◽  
Corporate Cash Holdings

This research investigates whether the presence of controlling founders and families has significant impact on the level of cash holdings, and their implications on firm value. The agency cost of cash holdings in founder firms is arguably less severe than family firms, due to founders’ economic incentives, strong psychological commitment and superior knowledge, whereas family firms are exposed to adverse selection and moral hazard as a result of altruism. Results indicate that founder firms hold a significantly higher level of cash holdings than family firms. In addition, there is a positive interaction effect between founder management and cash holdings on firm value, suggesting the presence of founders as managers helps to mitigate the agency costs of cash holdings.

Audit Quality and the Market Value of Cash Holdings: The Case of Office-Level Auditor Industry Specialization

2014 ◽  
Vol 34 (2) ◽  
pp. 27-57 ◽  
Author(s):  
Jeong-Bon Kim ◽  
Jay Junghun Lee ◽  
Jong Chool Park
Keyword(s):  
Financial Reporting ◽  
Firm Value ◽  
Capital Investment ◽  
Audit Quality ◽  
Cash Holdings ◽  
Market Value ◽  
High Quality ◽  
Value Of Cash ◽  
Office Level ◽  
Industry Specialist

SUMMARY This study investigates the monitoring role of high-quality auditors defined as office-level industry specialists in the stock market valuation of cash assets. We find that the market value of cash holdings is significantly higher for the client of an industry specialist auditor. The marginal value of cash is 34 cents higher for the client of a joint-industry specialist at both the national and city levels than for the client of a nonspecialist. We also find that cash holdings are more closely associated with capital investment and the market value of capital investment is significantly higher when the auditor is a joint-industry specialist. Moreover, we find that the value of cash increases significantly when the client changes its auditor to a joint-industry specialist. Our findings hold even after controlling for the client's governance efficacy and financial reporting quality. Our results provide new insight into the mechanism through which high-quality audits affect firm value: External audits facilitate shareholders' monitoring over managerial cash expenditures, thereby leading market participants to attach a higher value to cash holdings.

scholarly journals Corporate governance and firm valuation – the case of China

2009 ◽  
Vol 7 (2) ◽  
pp. 21-29 ◽  
Author(s):  
Ohannes George Paskelian ◽  
Stephen Bell
Keyword(s):  
Firm Value ◽  
Cash Holdings ◽  
Firm Valuation ◽  
Government Ownership ◽  
Private Benefits ◽  
Controlling Shareholder ◽  
Foreign Investors ◽  
High Government ◽  
Corporate Cash Holdings ◽  
Strong Inverse Relationship

We examine the determinants and implications of Chinese corporate cash holdings in the 1993- 2006 period. Agency theories assert that firms with a large controlling shareholder have relatively large cash holdings because of the greater ability of the controlling shareholder to extract private benefits from the cash holdings. Our findings show a very strong inverse relationship between cash holdings and firm valuation in high government ownership firms. Also, we find that in firms with high government ownership, dividend payouts are highly valued. We conclude that Chinese investors see government ownership as a factor that reduces firm value. They prefer relatively higher dividends from firms having high government ownership. Conversely, investors assign much higher value to firms with relatively low government ownership and they tend to be neutral about the dividends payouts of such firms. Also, investors value highly the presence of foreign investors in Chinese firms and tend to be neutral about dividend payouts of firms with high foreign ownership concentration.

Sign in / Sign up

Export Citation Format

Share Document