The impact of corporate environmental responsibility on corporate cash holdings: evidence from the most polluting listed companies in China

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jia Liao ◽  
Liping Zheng ◽  
Yu Yuan
Keyword(s):  
Environmental Protection ◽  
Emerging Market ◽  
Cash Holdings ◽  
Listed Companies ◽  
Environmental Responsibility ◽  
Corporate Environmental Responsibility ◽  
Content Type ◽  
Value Of Cash ◽  
The Impact ◽  
Corporate Cash Holdings

PurposeThe purpose of this paper is to examine the impact of corporate environmental responsibility (CER) on corporate cash holdings. This paper also investigates the moderating effects of ownership type and institutional environment between CER and corporate cash holdings.Design/methodology/approachThis study uses the data of the most polluting listed companies on the Shanghai and Shenzhen stock exchange markets over the period 2010–2019. CER data from Hexun.com (a professional CSR evaluation system) are used to measure CER performance. Two proxies are used to measure the level of cash holdings simultaneously, where CASH1 is calculated as the ratio of cash and cash equivalents to total assets, and CASH2 is calculated as the ratio of cash and cash equivalents to net assets (total assets minus cash and cash equivalents). Finally, multiple regression analysis is applied to test the research hypotheses.FindingsThe results show that environmentally responsible companies hold substantially less cash, and the result is statistically significant and robust even after using firm fixed effects and applying alternative measures of cash holdings or alleviating potential endogeneity. In addition, the results of cross-sectional tests show that the negative relation between CER and corporate cash holdings is concentrated among non-state-owned enterprises, and firms in provinces with more developed institutions. Furthermore, the result of the analysis of the economic consequence shows CER significantly increases the value of cash holdings.Research limitations/implicationsThis study focuses on China's institutional context, which limits the generalizability of the findings to other countries. However, the objective of this research can be studied in other institutional settings, so the above limitations provide a springboard for further research. Furthermore, the environmental protection investment, green technology innovation, and even pollutant discharge of companies can also be important indicators to measure the performance of firms in fulfilling their environmental responsibilities, which can be considered in future research.Practical implicationsThe findings of this study may help company management in China to establish a correct view of environmental responsibility to achieve corporate value creation and corporate sustainability. And our research can also provide the policy reference value for the Chinese government to further improve environmental protection policies and systems, guide enterprises to conduct green production to realize the country's vision of an environmentally friendly society.Originality/valueBased on the current background that countries in the world advocate the development of a green economy, this is the first study to examine the impacts of the environmental responsibility of the most polluting companies on corporate cash holdings and the value of cash holdings in the context of China, an emerging market.

Female directors and corporate cash holdings: monitoring vs executive roles

2019 ◽  
Vol 58 (2) ◽  
pp. 295-312 ◽  
Author(s):  
Domenico Rocco Cambrea ◽  
Paolo Tenuta ◽  
Vincenzo Vastola
Keyword(s):  
Fixed Effects ◽  
Gender Diversity ◽  
Cash Holdings ◽  
Listed Companies ◽  
Management Decision ◽  
Content Type ◽  
Female Directors ◽  
Cash Reserves ◽  
The Impact ◽  
Corporate Cash Holdings

Purpose The purpose of this paper is to investigate the impact of gender diversity on corporate cash holdings by scrutinizing different positions covered by female board directors. Design/methodology/approach The paper examines a sample of Italian listed companies between 2006 and 2015. Fixed-effects regressions are employed as the base empirical methodology. In addition, because the link between corporate governance variables and cash may suffer from endogeneity issues, the study employs several tests to control for this potential problem. Findings The empirical findings demonstrate that the relationship between gender diversity and cash holdings depends on the role of female directors on the boards. Specifically, the evidence shows that women in monitoring functions, ruled by independent directors and female chairs, led to a decrease in cash reserves. Conversely, companies managed by female CEOs have larger cash holdings. Research limitations/implications The paper refers to Italian listed companies only and does not analyze whether and how the financial crisis has affected the link between female directors and cash reserves. Practical implications The study provides insights for the diverse effects of female directors on cash management decision and contributes to the debate on gender diversity capabilities for improving firm financial flexibility. Originality/value This paper is the first empirical study to attempt to disentangle the effect of gender diversity on cash holdings. It sheds light on the consequences of appointing female directors on cash policies and explores the Italian context after the introduction of the gender quotas law.

Audit committee effectiveness and financial reporting timeliness

2018 ◽  
Vol 9 (1) ◽  
pp. 34-55 ◽  
Author(s):  
Ahmed Atef Oussii ◽  
Neila Boulila Taktak
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Emerging Market ◽  
Listed Companies ◽  
Audit Committees ◽  
Future Research ◽  
Governance System ◽  
Content Type ◽  
Financial Expertise ◽  
The Impact

Purpose The purpose of this paper is to investigate whether there is any relationship between the effectiveness of an audit committee and the financial reporting timeliness of Tunisian listed companies as proxied by external audit delay (AD). Analysis focuses on five audit committee characteristics: authority, financial expertise, independence, size and diligence. Design/methodology/approach Empirical tests address 162 firm-year observations drawn from Tunisian listed companies during 2011-2013. Findings Multivariate analyses indicate that audit committees with members who have financial expertise are significantly associated with shorter AD. Thus, the results suggest that audit committee financial expertise contributes to the improvement of financial statements’ timeliness. Research limitations/implications The audit committee attributes examined in this study were based on DeZoort et al. (2002) framework. There could be other aspects of audit committee effectiveness such as audit committee tenure and audit committee chair characteristics, which were not addressed in the present study. Thus, future research may consider and examine these other components of audit committee effectiveness. Practical implications Findings have managerial implications. Companies can re-look into how to further improve audit committee composition in order to enhance the timeliness of financial reporting. The issues of audit committee effectiveness and timely reporting also affect regulators and policy makers since they need to play a role in the establishment of effective audit committees and the improvement of financial reporting timeliness. Originality/value This study is one of few that have examined the impact of audit committee effectiveness on ADs in an emerging market country. Findings lend credence to the belief that audit committee members’ financial expertise enhances the quality of financial reporting by firms in a North African market criticized for the lack of maturity of its corporate governance system (Klibi, 2015; Fitch Ratings, 2009).

Corporate cash holdings and firm life cycle: evidence from China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ajid Ur Rehman ◽  
Tanveer Ahmad ◽  
Shahzad Hussain ◽  
Shoaib Hassan
Keyword(s):  
Life Cycle ◽  
Growth Stage ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
External Financing ◽  
Strategic Choices ◽  
Content Type ◽  
Firm Life Cycle ◽  
Corporate Cash Holdings

Purpose The purpose of this paper is to investigate how corporate cash holdings changes across firm life cycle and how firms undergo heterogeneous dynamic cash adjustment as they advance from one stage to the next stage. Design/methodology/approach This study uses an extensive data set of 2,994 Chinese A-listed firms. The authors use generalized method of moments (GMM) and Fisher Panel unit root testing to investigate the targeting behavior of Chinese firms. Findings The uni-variate investigation reveals that firms in the growth stage exhibits the highest cash levels and firms in the decline stage report the lowest cash levels. As growth firms have high investment needs, they may require raising external capital to meet investment needs. To avoid the costly external financing, firms in growth stage tend to hold more cash. The GMM estimation reveals that along all the phases of firm life cycle there are evidences of trade-off behavior of corporate cash holdings. The authors report that adjustment rate increases as firms enters into the growth stage. Practical implications The findings provide both theoretical and practical insight to align cash policies with the available strategic choices along firm life cycle in an emerging market characterized by market imperfections. Originality/value The study is unique from the context that it is applying robust methodology to one of rarely investigated area in corporate cash policy. The peculiar Chinese study setting characterized by higher information asymmetry, high cost of external financing and heterogeneous access to financing sources provide theoretical and empirical underpinnings to investigate and gain insight about how corporate cash policy can be aligned with strategic choices available across different stages of life cycle.

How does Buddhism affect corporate cash holdings?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yaoqin Li ◽  
Xichan Chen ◽  
Wanli Li ◽  
Xixiong Xu
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Institutional Ownership ◽  
Religious Culture ◽  
Legal Institutions ◽  
Governance System ◽  
Heckman Selection Model ◽  
Content Type ◽  
The Impact ◽  
Corporate Cash Holdings

PurposeThis study explores whether and how Buddhism impacts corporate cash holdings. Buddhist culture affects investors' perception of how cash is deployed and then influences corporate cash holdings. This study first examines the impact of Buddhism on corporate cash holdings and then investigates whether formal governance mechanisms such as legal institutions and institutional ownership influence the relationship between Buddhism and corporate cash holdings.Design/methodology/approachThe authors conduct empirical tests with data on Chinese listed companies between 2006 and 2019. Buddhism is measured with the natural logarithm of the number of Buddhist temples within a radius of a certain distance around a firm's headquarters. The authors adopt the OLS method to regress and take the 2SLS method, Heckman selection model and FEVD approach to address the endogeneity issue.FindingsThe results show a positive relationship between Buddhism and corporate cash holdings. This positive relation is more prominent for firms located in regions with weak legal institutions and for firms with low institutional ownership. Further analysis shows that Buddhism works through the channel of alleviating agency problems and finally improves the value of cash to investors.Research limitations/implicationsThe authors’ findings have important implications. First, this study provides inspiration for incorporating the ethical values of traditional cultures, such as Buddhism, into the corporate governance system. Second, the findings imply that informal institutions can influence corporate financial decisions beyond the effect of formal institutions, suggesting that informal systems should be emphasized when dealing with business affairs in countries where legal institutions are relatively weak. Third, the results suggest the significance of encouraging research on religious culture to explore its active role in corporate governance.Originality/valueThis study illustrates the positive value of religious culture in advancing corporate governance by relating Buddhism to corporate cash holdings based on the explanation of investors' perception. It makes a marginal contribution to the literature that investigates the determinants of cash policies and explores the firm-level consequences of religious culture, adding to the research area of culture and corporate finance.

The impact of corporate environmental responsibility strategy on brand sustainability

2018 ◽  
Vol 9 (3) ◽  
pp. 366-394 ◽  
Author(s):  
Chengzhi Long ◽  
Jing Lin
Keyword(s):  
Competitive Advantage ◽  
Empirical Evidence ◽  
Two Dimensions ◽  
Environmental Responsibility ◽  
Brand Value ◽  
Corporate Environmental Responsibility ◽  
Content Type ◽  
Chinese Context ◽  
The Impact ◽  
The Relationship

PurposeThough enormous research studies were conducted on corporate environmental responsibility (CER), few of them could empirically justify how CER helps to improve firm’s competitive advantage and firms are still hesitant to incorporate CER with their business strategy at present. The purpose of this paper is to theoretically and empirically explore how the CER strategy could help the firm to gain competitive advantage in Chinese context, particularly in terms of achieving brand sustainability (BS).Design/methodology/approachIn this study, 310 listed companies in China were chosen as research sample. First, the CER strategies were classified into developing eco-friendly products, adopting EMAS or other eco-management, enhancing the impact of CER through value chain and charitable CER. Second, BS is constructed as two dimensions, i.e. resource-acquisition and consumer impact. Accordingly, this paper analyzed the relationship between CER and BS with regression model analysis, taking account of several moderating and control variables.FindingsThe results indicate that CER strategies have positive effect on BS. Among all CER strategies, developing eco-friendly products and charitable CER undertakings are the most effective ones to promote BS performance. Also, the paper found that the length of time in adopting CER strategy moderates the effect of CER on BS. The empirical evidence proves that CER strategies could enhance the brand value in terms of BS and help the company to gain competitive advantage.Research limitations/implicationsFirst, most of our samples are of the state-owned enterprises, so our assumption might not be applicable to other types of business. Second, corporate social responsibility (CSR) communication is an important factor in the relation between CSR and corporate performance, but it is not taken into account in this study. Third, the difference in industries and ownership in this research is out of concern.Practical implicationsAs this paper has provided empirical evidence to reveal the effectiveness of different CER strategies, firms in China could be more motivated to undertake CER not only for the sake of environment but also for their brand value and competitive advantage. More importantly, this paper could be a valuable reference for the firms in China to choose suitable and effective CER strategies, as proved in this study, to gain competitive advantage in the market.Originality/valueAt first, while public environmental awareness has improved gradually, we introduce the BS concept to explain how the CER strategies affect CCA. This approach gives us another perspective to highlight the relationship between these two constructs. Second, we conducted our research from practical perspective to explore how to apply the CER undertakings as the company’s strategy. Third, we conducted our empirical research in Chinese context, which will enrich the theoretical CER and CSR literature.

Corporate cash holdings and disclosure violations: an empirical investigation of Jordanian listed companies

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Safaa Alsmadi ◽  
Ahmad Alkhataybeh ◽  
Mohammad Ziad Shakhatreh
Keyword(s):  
Positive Impact ◽  
Capital Expenditure ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Listed Companies ◽  
Method Of Moment ◽  
Content Type ◽  
Equity Issues ◽  
Moment Estimation ◽  
The Impact

Purpose This study aims to examine the impact of low-quality financial statements; that is, disclosure violations reported by the Securities Exchange Commission related to the level of cash holdings (CH) of firms listed on the Amman Stock Exchange (ASE). Design/methodology/approach Using panel data from 107 ASE-listed companies from 2009 to 2018, the study uses generalized method of moment estimation to examine the research hypothesis. This study hypothesize that disclosure violations can affect the level of CH and control for several variables that affect this level. Findings The results show that disclosure violations significantly affect the level of CH and that cash flow, capital expenditure and debt issues have a significantly positive impact on corporate CH. On the other hand, the market to book ratio and sales growth were found to be insignificant. Research limitations/implications The limitations of the research include the fact that information on research and development and equity issues were not available, so were not included in the examination. Practical implications It is recommended that managers enhance the quality of disclosures since this allows them to hold lower levels of cash and exploit more investment opportunities. Policymakers are recommended to supervise firm disclosures closely and create ratings for disclosure quality. Originality/value To the best of the author’s knowledge, this is the first empirical research on the association between proven low-quality disclosures and the level of corporate CH among Jordanian listed companies.

Corporate cash holdings, firm performance and national governance: evidence from emerging markets

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Imad Jabbouri ◽  
Hamza Almustafa
Keyword(s):  
Firm Performance ◽  
Emerging Markets ◽  
Cash Holdings ◽  
Content Type ◽  
Dynamic Framework ◽  
Institutional Settings ◽  
The Impact ◽  
The Relationship ◽  
Corporate Cash Holdings

PurposeThis paper aims to document the impact of corporate cash holdings on firm performance in Middle East and North African (MENA) emerging markets. The authors also examine how the quality of national governance shapes the interaction between corporate cash holdings and firm performance.Design/methodology/approachThe authors employ data from non-financial firms listed on the stock markets of twelve MENA countries between 2004 and 2018. The empirical model avoids the shortcomings of the prior literature by applying a dynamic framework to the relationship between cash holdings and firm performance.FindingsThis research reports a significant positive relationship between corporate cash holdings and firm performance. The results appear to be more pronounced in countries with strong national governance and more developed institutional settings. The findings demonstrate that most benefits of corporate cash holdings can be achieved under strong institutional settings. The authors argue that the positive impact that national governance has on individual firms by reinforcing investors' protection and lowering agency problems increases the added value of cash holdings.Practical implicationsThe findings should encourage local authorities and policymakers to reinforce the law and instigate new regulations to strengthen the quality of national governance and restore the integrity of local markets.Originality/valuePrior studies have largely been silent on how national governance can shape the relationship between corporate cash holdings and firm performance. This paper draws attention to this issue within the context of MENA emerging markets. To the authors' best knowledge, this is the first study that explores the interaction between cash holdings, firm performance and national governance in MENA emerging markets.

Sales order backlog and corporate cash holdings

2020 ◽  
Vol 28 (3) ◽  
pp. 351-371
Author(s):  
Kailing Deng ◽  
Linda Nichols ◽  
Li Sun
Keyword(s):  
Corporate Governance ◽  
Performance Indicator ◽  
Cash Holdings ◽  
Content Type ◽  
Precautionary Motive ◽  
Research Questions ◽  
The Impact ◽  
The Relationship ◽  
Corporate Cash Holdings

PurposeWe examine the impact of sales order backlog (an important leading performance indicator) on corporate cash holdings and the role of corporate governance in the relation between sales order backlog and cash holdings.Design/methodology/approachWe use the regression analysis to examine our research questions.FindingsConsistent with the agency motive and the precautionary motive of cash holdings, we document a significant negative relation between order backlog and cash, suggesting that firms with higher order backlog hold less cash. We further examine and find that the relationship between order backlog and cash becomes stronger for firms with stronger corporate governance, highlighting the role of governance in determining the level of corporate cash holdings.Originality/valueOur study contributes to the accounting literature on sales order backlog and the finance literature on corporate cash holdings. In particular, our study contributes to developing a more comprehensive understanding of the sales order backlog because it is still an under-researched area in accounting. To the best of our knowledge, this study is perhaps the first empirical study that examines the direct link between order backlog and cash.

Sign in / Sign up

Export Citation Format

Share Document