Trust and Corporate Cash Holdings

Dudley, Evan; Zhang, Ning

doi:10.2139/ssrn.2680280

Cited by 15 publications

(25 citation statements)

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“…Results show that culture affects dividend smoothing (Javakhadze, Ferris, & Sen, 2014), firm value, and performance (Fauver, McDonald, & Taboada, 2018). Moreover, trust operates as a substitute for formal shareholder protection, limiting self‐dealing behavior and increasing corporate cash holdings (Dudley & Zhang, 2016) and financial development (Cline & Williamson, 2016).…”

Section: Resultsmentioning

confidence: 99%

“…A number of studies explore the consequences of new laws-like banking reforms (Hsieh & Wu, 2012), governance rules (Funchal & Monte-Mor, 2016), investor protection (Chen, Li, & Lin, 2015), and enhanced disclosures (Craighead, Magnan, & Thorne, 2004)-on the efficiency of regulations on shareholder litigation (Ni & Yin, 2018), takeovers (Cain, McKeon, & Solomon, 2017), and corporate governance (Aggarwal, Schloetzer, & Williamson, 2019). A main result of this literature is that new regulation is associated with significant abnormal returns, which do not necessarily increase corporate value (Larcker, Ormazabal, & Taylor, 2011) and whose effects are mitigated or amplified by country-or industry-level institutions (Giroud & Mueller, 2010 Moreover, trust operates as a substitute for formal shareholder protection, limiting self-dealing behavior and increasing corporate cash holdings (Dudley & Zhang, 2016) and financial development (Cline & Williamson, 2016).…”

Section: General Characteristics Of Previous Empirical Studiesmentioning

confidence: 99%

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Corporate governance and institutions—A review and research agenda

Zattoni

Dedoulis

Leventis

et al. 2020

Corporate Governance

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Research Question/Issue Over the last decades, research on the relationship between national institutions, governance mechanisms, and firm outcomes has been increasing. This review aims at (i) analyzing extant research in this area, (ii) identifying influential current trends, and (iii) highlighting future avenues of research. Research Findings/Insights Using a content analysis of 165 articles published in top journals from accounting, finance, management, and organization disciplines, we explore research on institutions, corporate governance, and firm outcomes. Our results show that stronger national institutions aimed at protecting investors are mostly associated with better corporate governance and firm financial outcomes and that these relationships are moderated by some contingency factors. Theoretical/Academic Implications Our findings encourage scholars to further explore the relationship between national institutions, corporate governance, and firm outcomes by using theoretical frameworks and methods allowing them (i) to develop a “thicker” understanding of the national institutional context, (ii) to analyze powerful stakeholders' influence on the above relationships, and (iii) to better understand the role played by informal institutions. Practitioner/Policy Implications Our findings help policymakers and investors to (i) better understand how national institutions impact on both governance mechanisms and firm outcomes and (ii) develop policies or design governance mechanisms taking into consideration country‐, industry‐, and firm‐level contingencies.

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Section: Resultsmentioning

confidence: 99%

Section: General Characteristics Of Previous Empirical Studiesmentioning

confidence: 99%

Corporate governance and institutions—A review and research agenda

Zattoni

Dedoulis

Leventis

et al. 2020

Corporate Governance

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“…Agency incentives aim to discipline manager misbehavior regarding the efficient use of cash and to align managers and shareholders interests to enhance firm value (Anderson & Hamadi, ; Cheung, ; Dittmar et al, ; Dudley & Zhang, ; Louis, Sun, & Urcan, ; Nikolov & Whited, ; Deb et al, 2017). However, agency conflicts can have a relevant impact in cash holdings of corporations.…”

Section: Approaches Regarding Cash Holdings: a Brief Overviewmentioning

confidence: 99%

“…In addition, country‐level variables can also impact cash holdings due to agency problems. Dudley and Zhang () suggest that agency hypothesis predicts that shareholders will demand firms to disgorge more cash in countries with lower level of societal trust. Loncan () finds that mitigation of agency conflicts and reduction of financing constraints can be associate with the negative impact of foreign institutional ownership in cash holding, using a sample of firms in emerging economies.…”

Section: Approaches Regarding Cash Holdings: a Brief Overviewmentioning

confidence: 99%

What Do We Know About Corporate Cash Holdings? A Systematic Analysis

Cruz¹,

Kimura²,

Sobreiro³

2019

J Corp Accounting Finance

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Cash holdings play an important role at the heart of firms' policies. Researchers have devoted considerable attention to the dramatic increase in cash reserves despite alternative instruments such as debt, derivatives, and credit lines. The finance literature discusses the antecedents and determinants of cash holdings as well as the different reasons for firms to hold cash. In this paper, we present a systematic literature review of cash holdings in the finance field. The major studies in this area are classified and coded, and a research agenda and recommendations that may advance the field are discussed. © 2019 Wiley Periodicals, Inc.

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“…In particular, these authors find that the negative correlation between cash holdings and cash-flow, and the positive association between cash holdings and debt maturity are an exclusive phenomenon of the U.K. and France, respectively. More recently, Dudley and Zhang (2016) emphasise that societal trust has a positive effect on firm cash holdings and this effect is stronger in firms located in countries with weak institutions. Moreover, they find that investors value cash more highly in firms located in countries with higher levels of societal trust.…”

Section: Related Literaturementioning

confidence: 99%

Determinants of corporate cash holdings: Evidence from Portuguese publicly traded firms

Fernandes

Coelho

Peixinho

2017

DAMeJ

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This paper investigates the determinants of cash holdings of publicly traded Portuguese firms. We find that such firms hold less cash than similar companies operating in countries where both shareholders and creditors' rights are more tightly protected by the law. In addition, our regression results suggest that leverage, other liquid assets, and firm growth are negatively correlated with our sample firms' cash holdings whereas long-term debt and financial distress are positively correlated. Our findings cannot be reconciled with just one of the existent theories (trade-off, pecking order and free cashflow theory), and emphasize the importance of a country's legal, institutional, and economic environment for explaining firms' cash holdings decisions.Keywords: cash holdings; panel data; Portuguese publicly traded firms; liquidity. ResumoEste artigo investiga os determinantes de liquidez das empresas cotadas em Portugal. A análise efetuada sugere que estas empresas detêm menos meios líquidos em comparação com empresas similares de países que oferecem uma maior proteção legal aos direitos dos acionistas e credores. Os resultados da regressão sugerem ainda que a alavancagem, outros ativos líquidos, e crescimento da empresa estão negativamente correlacionados com a liquidez detida pelas empresas da amostra enquanto o financiamento de longo prazo e o 'distress' financeiro estão positivamente correlacionados. As conclusões deste artigo não são totalmente explicadas pelas teorias existentes (trade-off, pecking order e free cash-flow) e enfatizam a importância do ambiente legal, institucional e económico na explicação das decisões de liquidez nas empresas.Palavras-chave: liquidez; dados de painel; empresas portuguesas cotadas; meios líquidos.

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Trust and Corporate Cash Holdings

Cited by 15 publications

References 0 publications

Corporate governance and institutions—A review and research agenda

Corporate governance and institutions—A review and research agenda

What Do We Know About Corporate Cash Holdings? A Systematic Analysis

Determinants of corporate cash holdings: Evidence from Portuguese publicly traded firms

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