scholarly journals Excess cash holdings, investment opportunity and shareholder value: European evidences

2016 ◽  
Vol 14 (1) ◽  
pp. 630-639 ◽  
Author(s):  
Simone Terzani ◽  
Giovanni Liberatore
Keyword(s):  
Financial Constraints ◽  
Shareholder Value ◽  
Cash Holdings ◽  
Investment Opportunity ◽  
Ceteris Paribus ◽  
Marginal Value ◽  
Investment Opportunities ◽  
High Investment ◽  
Precautionary Motive ◽  
Excess Cash

In this paper, we examine the marginal value of extra liquidity for a sample of excess cash listed companies (i.e. ECs) operating in the five largest E.U. economies (France, Italy, Germany, Spain and UK). After had shown that these companies are generally penalised by the market, in line with previous literature, we show that extra cash held is not detrimental to shareholder value when it is combined with high investment opportunities leading, hence, in a premium of 1€ extra held. This relation is even stronger during the financial crisis of 2008. These results confirm that the main reason why ECs are generally valued less by the market is the concern that their managers may deploy excess cash in value-destroying activities. However, EC firms are not penalized ceteris paribus when there are investment opportunities. In addition, such relation is stronger with the presence of financial constraints and lack of liquidity, as explained by the transaction and precautionary motive for holding cash.

Earnings Quality Effect on Corporate Excess Cash Holdings and Their Marginal Value

2018 ◽  
Vol 54 (4) ◽  
pp. 901-920 ◽  
Author(s):  
Minshik Shin ◽  
Sooeun Kim ◽  
Jongho Shin ◽  
Jaeik Lee
Keyword(s):  
Earnings Quality ◽  
Cash Holdings ◽  
Marginal Value ◽  
Excess Cash

scholarly journals Excess cash holdings and shareholder value

2011 ◽  
Vol 51 (2) ◽  
pp. 549-574 ◽  
Author(s):  
Edward Lee ◽  
Ronan Powell
Keyword(s):  
Shareholder Value ◽  
Cash Holdings ◽  
Excess Cash

scholarly journals Pengaruh Asimetri Informasi Pada Kebijakan Dividen Dengan Investment Opportunity Set Sebagai Variabel Pemoderasi

2018 ◽  
pp. 2040
Author(s):  
Ni Putu Linda Yasmita ◽  
Anak Agung Gde Putu Widanaputra
Keyword(s):  
Information Asymmetry ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Investment Opportunity ◽  
Dividend Payout ◽  
Asymmetry Of Information ◽  
Investment Opportunity Set ◽  
Investment Opportunities ◽  
High Investment ◽  
A Company

The purpose of this study is to obtain empirical evidence of investment opportunity capability sets to moderate the influence of information asymmetry on dividend policy. This research was conducted at a manufacturing company listed on Indonesia Stock Exchange 2014-2016. Sampling method used is purposive sampling. The sample size is 30 with 72 observations. Technique Data analysis used is test of Moderated Regression Analysis (MRA). Based on the results of the analysis, it is known that the investment opportunity set is not as a moderator of the influence of information asymmetry on the dividend policy. This suggests that when firms have high investment opportunities with high levels of asymmetry, it is not necessarily that the company will pay low dividends or not share them to the shareholders, since management will manage earnings annually as reserves to be reinvested without reducing the proportion of dividend payout to investors. This study provides implications for investors as a consideration in investing in a company to see how the bid ask and dividend payout ratio of the company's shares. Keywords: asymmetry of information, investment opportunity set, dividend policy

OVERCOMING FINANCIAL FRICTIONS WITH THE FRIEDMAN RULE

2018 ◽  
Vol 22 (8) ◽  
pp. 2141-2181 ◽  
Author(s):  
Sergio Salas
Keyword(s):  
Monetary Policy ◽  
Closed Form ◽  
Equilibrium Model ◽  
Financial Constraints ◽  
Financial Frictions ◽  
Investment Opportunity ◽  
Closed Form Solutions ◽  
Friedman Rule ◽  
Central Planner ◽  
Investment Opportunities

A general equilibrium model with financial frictions in which individuals may encounter unobservable investment opportunities is developed along the lines of Kiyotaki and Moore (2012). I study efficiency properties induced by money and monetary policy when financial frictions prevent optimal equilibrium allocations. By providing closed-form solutions to all prices, allocations, welfare, and, especially, the distribution of individuals with respect to assets, I show that the Friedman rule achieves maximal social welfare, independent of how tight the financial constraints may be. The same level of welfare would be induced by an omniscient central planner able to verify who has an investment opportunity.

Industry Tournament Incentives and the Product-Market Benefits of Corporate Liquidity

2018 ◽  
Vol 54 (2) ◽  
pp. 829-876 ◽  
Author(s):  
Jian Huang ◽  
Bharat A. Jain ◽  
Omesh Kini
Keyword(s):  
Chief Executive Officer ◽  
Cash Holdings ◽  
Chief Executive ◽  
Product Market ◽  
Capital Expenditures ◽  
Marginal Value ◽  
Corporate Liquidity ◽  
Value Of Cash ◽  
Excess Cash ◽  
Market Benefits

We evaluate the link between chief executive officer (CEO) industry tournament incentives (ITIs) and the product-market benefits of corporate liquidity. We find that ITIs increase the level and marginal value of cash holdings. Furthermore, ITIs strengthen the relation between excess cash and market-share gains, especially for firms that face significant competitive threats. Additionally, for firms with excess cash, higher ITIs lead to increased research and development (R&D) expenses, capital expenditures, and spending on focused acquisitions as well as reduced payouts. Overall, our findings suggest that ITIs increase the value of cash by incentivizing CEOs to deploy cash strategically to capture its product-market benefits.

Financial Constraints, R&D Investment, and the Value of Cash Holdings

2015 ◽  
Vol 05 (04) ◽  
pp. 1550011 ◽  
Author(s):  
Laurence Booth ◽  
Christos Ntantamis ◽  
Jun Zhou
Keyword(s):  
Financial Constraints ◽  
Cash Holdings ◽  
Alternative Methods ◽  
Development Activity ◽  
Marginal Value ◽  
Value Of Cash ◽  
The Status ◽  
Alternative Measures ◽  
Corporate Cash Holdings ◽  
D Investment

Existing studies document that cash holdings are more valuable for financially constrained firms than for financially unconstrained firms. We investigate whether the relation between financial constraints and the value of corporate cash holdings varies across firms with different engagement in research and development activity. Among firms with R&D investment, the marginal value of cash is significantly higher for financially constrained firms than unconstrained ones, whereas this difference is weak among firms without R&D investment. Our findings are robust to alternative measures of financial constraints and alternative methods to define R&D intensity. Our study extends the cash literature by showing that the value of cash holdings is affected by the status of financial constraints and the nature of investment jointly.

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