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

Abstract

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.

Islamic labelling and corporate governance: a perspective of Shariah compliance firms

“…In past few decades, many researchers have concentrated their attention on the importance of corporate governance and its effects on corporate social responsibility, financial reporting, firms’ performance, financial soundness and other factors that affect business success (Buallay, Hamdan, and Zureigat, 2017; Dias, Khalil and Taktak, 2020; Rodrigues and Craig, 2017; Rodrigues et al , 2017; Shariff et al , 2022). Prior researches concentrate on the effectiveness of corporate governance because it encourages capital formation, lowers the cost of capital, creates value-maximizing incentives and promotes strong markets (Bhatti and Bhatti, 2010; Alsmadi et al , 2022). Similarly, Samra (2016) argued that effective corporate governance lowers the cost of capital by reducing risk, easy access to external finance and improved operational performance.…”

Government Ownership and Corporate Cash Holdings: Empirical Evidence from the Amman Stock Exchange

“…In Jordan, cash holdings have been examined extensively. A stream of research has examined the determinants of the levels of cash held by Jordanian firms; for example, working capital management [4], directors' ownership, organizational ownership and foreign ownership [5], and disclosure quality [6]. Another stream has examined the effect of cash holdings on firm value [7] and profitability [8].…”