Cash holding and control-oriented finance
| Autor: | Ronald W. Anderson, Malika Hamadi |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2016 |
| Předmět: |
Economics and Econometrics
HG Finance Strategy and Management media_common.quotation_subject Control (management) Agency cost Shareholder 0502 economics and business Agency (sociology) Economics Asset (economics) Business and International Management Cash management Market value media_common 040101 forestry Finance 050208 finance business.industry 05 social sciences 04 agricultural and veterinary sciences Cash HD61 Risk Management 0401 agriculture forestry and fisheries business |
| Popis: | We critically reassess the notion that high liquid asset holding by firms faced with weak investor protection is evidence of managerial rent extraction. We show that firms facing agency problems may establish tight controls over management through concentrated ownership. Using data on Belgian listed firms between 1991 and 2006, we find a strong positive association between ownership concentration and cash holding. This indicates a precautionary motive on the part of the controlling shareholders who highly value control. We also find that firm market valuation is positively affected by the amount of cash held by firms. On the other hand, managerial ownership has no impact. These results are consistent with the hypothesis that firms' owners are pursuing a rational strategy to mitigate agency costs in the face of weak investor protections. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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