Corporate Financial Policy and the Value of Cash

Faulkender, Michael W.; Rong, Wang

doi:10.1111/j.1540-6261.2006.00894.x

Cited by 1,209 publications

(845 citation statements)

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“…Given that the value of the cash holdings represents a significant fraction of all corporate wealth (Faulkender and Wang, 2006), it deserves an investigation of the association of firm investing decisions with the marginal value of cash holdings (MVCH).…”

Section: Introduction and Overviewmentioning

confidence: 99%

Over-investment, the marginal value of cash holdings and corporate governance

Huang

Liao

Chang

2015

Studies in Economics and Finance

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Purpose -The purpose of this paper is to examine how investors' valuation of cash holdings is related to firm-level investment. Design/methodology/approach -As prior studies note that holding excess cash serve as a driver to would be over-investing, and that over-investment imposes substantial agency costs on shareholders, the authors focus on the value implications of holding cash in the presence of over-investment from the perspective of shareholders. Findings -By examining the publicly traded companies on Taiwan stock market, the authors uncover that cash is valued less in firms with over-investment than in those with under-investment and the magnitude of over-investment is negatively related to the marginal value of cash holdings (MVCH). It reveals that investment activities impact the value that shareholders place on cash holdings. Moreover, further tests indicate that higher block holdings and the presence of independent directors on boards can effectively mitigate the negative impact of over-investment on the MVCH. Practical implications -This paper enhances the understanding of the valuation implications of cash reserves held by firms with over-investment and the effectiveness of governance structures in containing the detrimental effect of investment-related agency costs on the value of holding cash. Originality/value -This paper provides pioneering evidence that outside investors discount cash assets in over-investing firms to reflect their expectations that they will not receive the full benefit of these assets; and this paper extends the literature on corporate governance by assessing the role of governance mechanisms in reversing the negative relation between over-investment and the MVCH.

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Section: Introduction and Overviewmentioning

confidence: 99%

Over-investment, the marginal value of cash holdings and corporate governance

Huang

Liao

Chang

2015

Studies in Economics and Finance

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“…This study follows Faulkender and Wang (2006) in measuring leverage. Leverage is measured by dividing firm's long term debt which also includes firm's short term borrowing on firm's long-term debt plus market capitalization.…”

Section: Leveragementioning

confidence: 99%

Corporate Cash Holdings and Adjustment Behaviour in Chinese Firms: An empirical Analysis Using Generalized Method of Moments

Rehman¹,

Wang²

2015

AABFJ

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This study is intended to find out the motives of cash holding in Chinese firms and theories associated with these motives. The study is unique because it not only estimates the adjustment speed of corporate cash holdings but also discuss several firm specific factors that affects cash holdings in Chinese firms with special reference to Chinese SOEs and NSOEs. An extensive set of panel data comprising 1632 A listed Chines firms, over a period from 2001 to 2013 are taken for analysis. The study reports a lower adjustment coefficient for Chinese firms compared to other developed nations. The study finds that target level of cash holdings in Chinese firms is better explained by Trade off and Pecking order theories. To cope with issues of endogeneity and serial correlation the study apply GMM and random effects model with an added AR (autoregressive) term. Keywords AbstractThis study is intended to find out the motives of cash holding in Chinese firms and theories associated with these motives. The study is unique because it not only estimates the adjustment speed of corporate cash holdings but also discuss several firm specific factors that affects cash holdings in Chinese firms with special reference to Chinese SOEs and NSOEs. An extensive set of panel data comprising 1632 A listed Chines firms, over a period from 2001 to 2013 are taken for analysis. The study reports a lower adjustment coefficient for Chinese firms compared to other developed nations. The study finds that target level of cash holdings in Chinese firms is better explained by Trade off and Pecking order theories.To cope with issues of endogeneity and serial correlation the study apply GMM and random effects model with an added AR (autoregressive) term. JEL Classification: M41, G34

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“…K tomuto účelu nejprve vytvoříme miniodvětví -oblasti (klastry) založené na zemi půso-bení, sektoru (dvouciferný ISIC rev 3.1), velikosti (mikrofi rmy s 2-10 zaměstnanci, malé fi rmy s 11-49 zaměstnanci, střední a velké fi rmy s více než 50 zaměstnanci), velikosti města, ve kterém jsou registrovány (hlavní město, město s více než 1 milionem obyvatel a město s méně než 1 milionem obyvatel) a odpovídající časovém období (2003( -2005( , 2006( -2009( -2013. V každém takovém klastru vypočítáme míru korupce zachycenou dotazníkovým šetřením BEEPS.…”

Section: Sestavení Vzorkuunclassified

Corruption and Firm Efficiency in New EU Countries

Hanousek¹,

Shamshur²,

Trešl³

2016

Politicka ekonomie

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Corruption and Firm Effi ciency in New EU CountriesWe study the eff ects of corruption on fi rm effi ciency using a unique comprehensive dataset of private fi rms from 10 Central and Eastern European countries for the period from 2002 to 2013. We fi nd that an environment characterized by a high level of corruption has an adverse eff ect on fi rm effi ciency. This eff ect is amplifi ed for fi rms with a lower propensity to behave corruptly, i.e. foreign-controlled fi rms, while domestically-owned fi rms are not penalized. At the same time, an environment characterized by considerable heterogeneity in perception of corruption is associated with an increase in fi rm effi ciency.Keywords: effi ciency, corruption, ownership structure, fi rms, panel data, stochastic frontier, Europe JEL Classifi cation: C14, C58, F37, G15, G17 ÚvodVětšina zemí podporovaná mezinárodními institucemi se snaží o potlačení korupce, protože korupce představuje pro mnoho zemí významné náklady a rizika. Přesto Institut Světové banky odhaduje, že celkový objem úplatků ve světové ekonomice dosahuje ročně řádově 1 000 miliard dolarů (Rose-Ackerman, 2004

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Corporate Financial Policy and the Value of Cash

Cited by 1,209 publications

References 49 publications

Over-investment, the marginal value of cash holdings and corporate governance

Over-investment, the marginal value of cash holdings and corporate governance

Corporate Cash Holdings and Adjustment Behaviour in Chinese Firms: An empirical Analysis Using Generalized Method of Moments

Corruption and Firm Efficiency in New EU Countries

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