Firm Value and Corporate Cash Holdings. Empirical Evidence from the Polish Listed Firms

The present study investigates the effects of family control on the value of corporate cash holdings. Using a large sample of French listed firms, the results show that the value of excess cash reserves is lower in family firms than in other firms, reflecting investors concern about the potential misuse of cash by controlling families. We also find that the value of excess cash is lower when controlling families are involved in management and when they maintain a grip on control, indicating that investors do not expect the efficient use of cash in these firms. Our findings are consistent with the argument that the extent to which excess cash contributes to firm value is lower when dominant shareholders are likely to expropriate firm resources. Overall, family control seems to be a key determinant of cash valuation when ownership is concentrated.

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Foreign Ownership, Capital Structure and Firm Value: Empirical Evidence from Vietnamese Listed Firms

SSRN Electronic Journal ◽

10.2139/ssrn.2196228 ◽

2013 ◽

Cited By ~ 2

Author(s):

Thi Phuong Vy Le ◽

Duc Nam Phung

Keyword(s):

Capital Structure ◽

Empirical Evidence ◽

Firm Value ◽

Foreign Ownership ◽

Listed Firms

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

Corporate Ownership and Control ◽

10.22495/cocv9i2c2art2 ◽

2012 ◽

Vol 9 (2) ◽

pp. 257-273 ◽

Cited By ~ 4

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.

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Corporate governance and firm valuation – the case of China

Corporate Ownership and Control ◽

10.22495/cocv7i2p2 ◽

2009 ◽

Vol 7 (2) ◽

pp. 21-29 ◽

Cited By ~ 1

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.

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

Management Research News ◽

10.1108/01409170510784805 ◽

2005 ◽

Vol 28 (4) ◽

pp. 61-73 ◽

Cited By ~ 6

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.

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Firm Value, Corporate Cash Holdings and Financial Constraint: A Study from a Developing Market

Australian Economic Papers ◽

10.1111/1467-8454.12082 ◽

2016 ◽

Vol 55 (4) ◽

pp. 368-385 ◽

Cited By ~ 3

Author(s):

Thi Lien Hoa Nguyen ◽

Le Ngan Trang Nguyen ◽

Thi Phuong Vy Le

Keyword(s):

Firm Value ◽

Cash Holdings ◽

Financial Constraint ◽

Corporate Cash Holdings

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Family control, agency conflicts, corporate cash holdings and firm value

International Journal of Emerging Markets ◽

10.1108/ijoem-07-2020-0828 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Ruchi Moolchandani ◽

Sujata Kar

Keyword(s):

Firm Value ◽

Family Firms ◽

Cash Holdings ◽

Minority Shareholders ◽

Content Type ◽

Family Control ◽

Indian Family ◽

Agency Conflict ◽

Cash Reserves ◽

Corporate Cash Holdings

PurposeThis paper examines whether family control exerts any influence on corporate cash holdings in Indian listed firms. It also examines how this accumulated cash of family firms impacts firm value.Design/methodology/approachThe study uses dynamic panel data regression estimated using two-step system generalized method of moments (GMM) on S&P BSE 500 firms during 2009–2018 for testing the repercussions of family control on the cash levels of a firm. Further, fixed effects regression has been employed for the valuation analysis.FindingsEstimation results showed that family control negatively impacts cash holdings in Indian firms. Further, the cash accumulation by family firms adversely affects the market valuation of the firm. These findings signal a principal–principal (P-P) agency conflict in Indian family firms, i.e. friction between family owners and minority shareholders' interests. Minority shareholders fear that a part of the cash reserves will be used by family members for personal benefits. Thus, they discount cash reserves in family firms.Originality/valueThe study adds to the determinants of corporate cash holdings in emerging markets. To the best of the authors’ knowledge, this is the first study from India investigating family control as a determinant of cash policy. It sheds light on the P-P agency conflict in Indian family firms. P-P agency conflict is less researched in cash holdings literature as opposed to the principal–agent managerial disputes. Also, the study uses a more comprehensive definition of family control rather than just considering the ownership as used in prior cash holding research.

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Does Shariah compliance affect corporate cash holdings and cash adjustment dynamics? Evidence from Malaysia

Pacific Accounting Review ◽

10.1108/par-07-2020-0100 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Moncef Guizani ◽

Gaafar Abdalkrim

Keyword(s):

Positive Impact ◽

Generalized Method Of Moments ◽

Cash Holdings ◽

Cash Flows ◽

Least Square ◽

Cash Holding ◽

External Financing ◽

Content Type ◽

Listed Firms ◽

Corporate Cash Holdings

Purpose The purpose of this paper is to investigate the effect of Shariah compliance status on corporate cash holding decision. Design/methodology/approach This study applies ordinary least square and generalized method of moments regression models for a sample of 178 Malaysian listed firms over the period 2008–2017. Findings The results show that Shariah compliance has positive impact on the level of cash reserves of firms. It is also found that Shariah-compliant (SC) firms quickly adjust their level of cash holdings toward a target level than non–Shariah-compliant (NSC) firms. These results can be explained by the restrictions imposed by Shariah rules on firms to sustain their compliance status. Further, the results reveal that SC firms are likely to hold more cash out of their cash flows. This is the expected result, as the firms operating within the ambit of Shariah rulings and regulations face external financing constraints. Practical implications This study has important implications for managers, policymakers and regulators. For managers, the study is an important reference to understand and design cash management policies by considering restrictions imposed by Shariah regulations. In particular, managers should pay more attention to periods of credit crunch and weak economic conditions in which SC firms may be exposed to greater bankruptcy risks. For policymakers and regulators, this study may be useful in assessing the effect of the restrictions imposed by Shariah law on firm’s cash holding decision. Therefore, in an effort to increase the supply of external financing available to SC firms, policymakers should encourage the issuing of Islamic financial products. Originality/value This paper focuses on SC firms where financial constraints are bound to be more stringent than for NSC firms. It explores the implications of relevant Islamic principles on corporate cash holdings.

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