Strategic deviance and cash holdings

Dong, Xueyan; Chan, Kam C.; Cui, Yujia; Guan, Jenny Xinjiao

doi:10.1111/jbfa.12487

Cited by 30 publications

(45 citation statements)

References 128 publications

(214 reference statements)

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“…It is recommended that future studies could focus on the developed countries, and that it is valuable to compare the effect of digitalization in different economies. For example, U.S. firms have also been holding a large amount of cash over the past several decades (Dong et al, 2021). Second, the shortcomings are related to the text analysis method itself.…”

Section: Discussionmentioning

confidence: 99%

Digital transformation and corporate cash holdings in China's A-share listed companies

Sun

Lin

Vochоzka

et al. 2022

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Research background: In the digital era, digital transformation has become a strategic imperative for leadership agenda. Many firms have accelerated their pace in digital transformation to improve their performance and competitiveness. Despite increasing attention in the literature on the role of digital transformation in firms? operations, understanding the effect of digital transformation on corporate finance remains limited. This study focuses on cash holdings, which are essential for firms to survive and thrive. Purpose of the article: The aim of this paper is to examine the critical role of digital transformation on the cash holdings of listed firms in China and provide micro evidence regarding the economic consequences of the digital economy from firm level. This study also aims to deepen our understanding of the influence of digital transformation on firms? operation and financial policy. Additionally, this paper attempts to provide relevant guidance for implementing policies to promote digital transformation and devise corresponding cash holding strategies. Methods: The text analysis method is used to measure the degree of digital transformation of China?s A-share listed companies. The sample covers 19,337 observations from 2007?2020. A multiple regression model with firm and year fixed effect is developed to investigate the relationship between digital transformation and corporate cash holdings. In the robustness test, this paper substitutes the independent and dependent variables, and adopts instrumental variable estimation method. In the mechanism test, this paper uses the sub-sample regression method in the mechanism test. Findings & value added: This study reveals that digital transformation can significantly reduce corporate cash holdings by alleviating the precautionary motive, agency motive and transaction motive of cash holdings. Further analysis shows that the negative effect of digital transformation on cash holdings is more profound in high-tech firms and non-state-owned enterprises. The methodology applied in this paper can be used in other economic research of firms. This study provides insights into the effects of digital transformation on corporate financial policy. This provides a solution for reducing firms? cash holdings. This study also deepens the understanding of digital transformation from a corporate perspective.

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Section: Discussionmentioning

confidence: 99%

Digital transformation and corporate cash holdings in China's A-share listed companies

Sun

Lin

Vochоzka

et al. 2022

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“…Following Dittmar and Mahrt‐Smith (2007), we measure excess cash with the residuals from the following regression (Dong et al., 2020; Kato et al., 2013; Tan, 2020):

\begin{equation} \def\eqcellsep{&}\begin{array}{c} Ln\left( {\frac{{Cas{h_{i,t}}}}{{N{A_{i,t}}}}} \right) = {\alpha _0} + {\alpha _1}Ln\left( {N{A_{i,t}}} \right) + {\alpha _2}\frac{{CF{O_{i,t}}}}{{N{A_{i,t}}}} + {\alpha _3}\frac{{NW{C_{i,t}}}}{{N{A_{i,t}}}} + {\alpha _4}{\left( {Industry{\rm{ }}Sigma} \right)_{i,t}} + {\alpha _5}\frac{{R{D_{i,t}}}}{{N{A_{i,t}}}}\\ + {\alpha _6}\frac{{Deb{t_{i,t}}}}{{N{A_{i,t}}}} + {\alpha _7}\frac{{Interes{t_{i,t}}}}{{N{A_{i,t}}}} + {\alpha _8}\frac{{C{E_{i,t}}}}{{N{A_{i,t}}}}{\rm{ + }}{\alpha _9}\frac{{M{V_{i,t}}}}{{N{A_{i,t}}}} + {\varepsilon _{i,t}} \end{array} .\end{equation}

…”

Section: Methodsmentioning

confidence: 99%

“…Following Dittmar and Mahrt-Smith (2007), we measure excess cash with the residuals from the following regression (Dong et al, 2020;Kato et al, 2013;Tan, 2020…”

Section: Regression Specificationmentioning

confidence: 99%

Institutional features and audit pricing of excess cash holdings: Do auditor liabilities beyond financial statement assurance matter?

Kuo

Zhai

2022

Business Fin & Account

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Our study explores the association between audit fees and clients’ excess cash to clarify how institutional features shape auditor assessment on agency problems. Prior studies suggest that this association is positive because agency problems from excess cash amplify auditor business risk, which induces auditors to charge higher fees as compensation. However, we find that this association is negative for Chinese listed companies. We further find that this negative association is attributable to the institutional features of China, where auditor liabilities do not extend beyond financial statement assurance. While prior literature argues that auditors incorporate clients’ agency problems into risk assessment, our results suggest that this incorporation does not naturally extend to cover agency problems from managerial misuses that are per se not audit failures. Whether auditors view agency problems from excess cash as a risk factor depends on the institutional features about the scope of their liabilities. Our study highlights the importance of institutional features in shaping auditor decisions.

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“…The University of runner-up, contributing 8 articles to the domain (Ahrends et al, 2018;Ahrends et al, 2018). Chan, K. C. of Western Kentucky University, Chen, N. of National Chiayi University, Lozano, M. B. of Universidad de Salamanca, Ozkan, N. and Sun, L of the University of Bristol are tried for contributing 7 documents (Dong et al, 2021;Flugum et al, 2020;Karpuz et al, 2020;Lozano & Yaman, 2020). The Williamson, R. presents are highest in terms of the number of total citations (TC =1975) and average citation per publication (C/P = 329.17) as predicts in table 10.…”

Section: Most Influential Institutionsmentioning

confidence: 99%

Global Research of Future Trends and Development in Cash Holding: A Bibliometric View

Shafiq¹,

Selamat²,

Nor³

et al. 2022

IJARAFMS

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Cash holdings are becoming a growing issue for worldwide scholars in finance to understand the importance of the strategic approach of corporate cash policy of cash reserves. In practice, firms have faced challenges in adopting an appropriate corporate cash holdings policy. It would be appropriate to study the notions of cash holding (CH) to explore suitable strategies to overcome the inadequacy of financial policy of cash reserves in the financial system worldwide. Thus, this paper aims to conduct a bibliometric analysis and fill this literature gap by identifying and evaluating the current status and developing trends of the cash holdings domain to provide meaningful insights and assist in further discussion. Bibliometric studies have proven to be beneficial in helping researchers better exploring the current research trends in a particular field of research. From Scopus database, this study identifies the knowledge evolution trend in the field of cash reserves or cash holdings, where 1,073 published articles from year 1971 to 2022 were reported. The current study's findings demonstrate that the number of publications in the domain of cash holdings has intensified in the past few years. The results also identify that Economics, Econometrics, and Finance were the more popular subject categories in the field of cash holdings from the past few decades. In terms of keyword analysis, the most frequently used keyword by authors associated with cash holdings are corporate governance and financial constraints. Moreover, co-authorship with researchers finds that most collaboration has taken place among United States, China, and the United Kingdom. Finally, citation analysis reveals the Journal of Corporate Finance dominates this field of research. Future strings of research should focus on the cash holdings and financial constraints, investment and external drivers that have an effect on cash holdings.

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Strategic deviance and cash holdings

Cited by 30 publications

References 128 publications

Digital transformation and corporate cash holdings in China's A-share listed companies

Digital transformation and corporate cash holdings in China's A-share listed companies

Institutional features and audit pricing of excess cash holdings: Do auditor liabilities beyond financial statement assurance matter?

Global Research of Future Trends and Development in Cash Holding: A Bibliometric View

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