State Ownership and Corporate Cash Holdings

Using a unique sample of newly privatized firms from 59 countries, this article provides new evidence about the agency costs of state ownership and new insight into the corporate governance role of country-level institutions. Consistent with agency theory, we find strong and robust evidence that state ownership is positively related to corporate cash holdings. Moreover, we find that the strength of country-level institutions affects the relation between state ownership and the value of cash holdings. In particular, as state ownership increases, markets discount the value of cash holdings more in countries with weaker institutions.

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Institutional development, state ownership, and corporate cash holdings: Evidence from China

Journal of Business Research ◽

10.1016/j.jbusres.2014.06.023 ◽

2015 ◽

Vol 68 (2) ◽

pp. 351-359 ◽

Cited By ~ 24

Author(s):

Yuanto Kusnadi ◽

Zhifeng Yang ◽

Yuxiao Zhou

Keyword(s):

Cash Holdings ◽

Institutional Development ◽

State Ownership ◽

Development State ◽

Corporate Cash Holdings

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

International Journal of Emerging Markets ◽

10.1108/ijoem-03-2020-0303 ◽

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.

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