How do chief financial officers influence corporate cash policies?

Florackis, Chris; Sainani, Sushil

doi:10.1016/j.jcorpfin.2018.08.001

Cited by 84 publications

(63 citation statements)

References 66 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Powerful CEOs tend to earn higher compensation and are more likely to become the chair of the board. Florackis and Sainani () show that strong chief financial officers may fulfill a monitoring role in firms with higher agency costs, as they have the power to influence corporate cash policies.…”

Section: Discussionmentioning

confidence: 99%

CEO power and corporate risk: The impact of market competition and corporate governance

Sheikh

2019

Corporate Governance

View full text Add to dashboard Cite

Research Question/Issue Although there is no unified theory that can explain the relationship between CEO power and corporate risk, the empirical evidence generally finds a positive association. This study argues that market competition and corporate governance play critical roles in influencing this relationship. Research Findings/Insights Using a large panel of nonfinancial U.S. corporations for the period 1992–2015, I find that CEO power is positively associated with total and idiosyncratic measures of risk. However, this positive association remains significant only when market competition is high or corporate governance is strong. Theoretical/Academic Implications The research design of this study combines the predictions of agency theory, the behavioral agency model, and prospect theory to further our understanding of the relationship between CEO power and corporate risk, including consideration of how competition and corporate governance influence this relationship. Practitioner/Policy Implications The empirical evidence presented in this study can help boards to more accurately gauge when CEO power is most beneficial in terms of optimal levels of corporate risk and to better understand the relationship between power and risk. The results suggest that boards should grant more power to their CEOs when their firms operate in high‐competition markets or have strong corporate governance in place.

show abstract

Section: Discussionmentioning

confidence: 99%

CEO power and corporate risk: The impact of market competition and corporate governance

Sheikh

2019

Corporate Governance

View full text Add to dashboard Cite

show abstract

“…The literature on the determinants of corporate cash holdings has mainly focused on the firm-specific factors such as firm size, leverage, capital expenditure, investment opportunities, working capital, and profitability (Chireka & Fakoya, 2017: Kasongo, 2019. Other studies have also found that behavioral characteristics of managers (Florackis & Sainani, 2018;Xu et al, 2019) and institutional factors such as national culture, corporate governance, and investor and creditor protection (Seifert & Gonenc, 2016; Orlova et al, 2017; Graham & Leary, 2018) determine corporate cash holdings. However, there is a paucity of literature investigating corporate life cycle as a determinant of cash holdings.…”

Section: Literature Reviewmentioning

confidence: 98%

Corporate life cycle and cash holding decisions: A South African study

Chireka

2020

Investment Management and Financial Innovations

View full text Add to dashboard Cite

The resource-based view theory suggests that as firms’ resource bases differ along the corporate life cycle, even corporate policies such as cash holdings vary along the life cycle. This study seeks to understand the effect of firm’s life cycle on corporate cash holding behavior. Previous literature has sought to investigate the firm and institutional determinants of corporate cash holdings. Using the resource-based view theory, this study investigates whether corporate life cycle can be another determinant of corporate cash holdings. A panel data analysis of a sample of 112 Johannesburg Stock Exchange (JSE) listed firms from 2011 to 2018 is utilized to determine if firm’s life cycle does influence cash holding behavior. Dickinson’s cash flow analysis is used to proxy life cycle stages and control other known determinants of corporate cash holdings such as firm size, leverage, profitability, dividend payments, and growth opportunities. Contrary to other studies, this study finds no significant relationship between life cycle stages and corporate cash holdings, suggesting that corporate cash holdings for South African firms are driven by other factors other than life cycle resource allocations. However, it is found that prior year cash balances, firm size, and profitability have significant positive relationships with cash holdings. It is also found that liquid asset substitutes, leverage, and investment opportunities exert a significant and negative influence on corporate cash holdings.

show abstract

“…As examined by recent literature, the board of directors is an essential component of corporate governance [41,73], particularly in substantial business enterprises [84]. e internal governance is ordinarily estimated by ownership structure, nonexecutive directors on board, effective audit, and so forth [85,86]. Research reveals that strong governance decreases the level of cash holdings [55,86].…”

Section: Board Financial Expertise (Bfe) and Cash Holdingmentioning

confidence: 99%

Board Financial Expertise and Corporate Cash Holdings: Moderating Role of Multiple Large Shareholders in Emerging Family Firms

Um-e-Habiba

Husnain³

et al. 2021

Complexity

View full text Add to dashboard Cite

This study contributes to the literature by exploring the relationship between board financial expertise and cash holding policy and further showing how this relation is moderated by multiple large shareholders (MLS). This research is based on agency theory, resource dependence, trade-off, and pecking order theory to confirm how resourceful directors screen cash holding practices. This study selects the 100 listed family firms from the emerging economy of Pakistan for the period of 2006–2017. With the use of static (random and fixed effect estimator) and dynamic (GMM) estimation techniques, this study reveals that the financial expertise of the board members has a significant negative impact on the firms’ cash holding level. Further, moderating effect of MLS between board financial expertise and cash holding is significantly positive due to weak corporate governance mechanisms in family firms. Moreover, the research has implications for developing corporate governance mechanism and the management of liquid assets that corporate management might use for their benefits.

show abstract

How do chief financial officers influence corporate cash policies?

Cited by 84 publications

References 66 publications

CEO power and corporate risk: The impact of market competition and corporate governance

CEO power and corporate risk: The impact of market competition and corporate governance

Corporate life cycle and cash holding decisions: A South African study

Board Financial Expertise and Corporate Cash Holdings: Moderating Role of Multiple Large Shareholders in Emerging Family Firms

Contact Info

Product

Resources

About