Debt Maturity, Cash Holdings, and Agency Problems

2011 ◽  
Author(s):  
Balbinder Singh Gill
Keyword(s):  
Cash Holdings ◽  
Agency Problems ◽  
Debt Maturity

scholarly journals Pengaruh Kepemilikan Asing , Leverage, Cash Holdings Dan Debt Maturity Terhadap Kinerja Keuangan Perusahaan

2020 ◽  
Vol 2 (3) ◽  
pp. 2893-2911
Author(s):  
Murti Sari Dewi ◽  
Erly Mulyani
Keyword(s):  
Real Estate ◽  
Financial Performance ◽  
Sampling Method ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Secondary Data ◽  
Foreign Ownership ◽  
Debt Maturity ◽  
Panel Regression ◽  
Cash Holding

This study aims to examine the effect of foreign ownership, leverage, cash holding and debt maturity on financial performance in property and real estate companies listed on the Indonesia stock exchange (idx) in the period 2014-2018. This study is categorized as causative research. The population in this study are property and real estate companies listed on the Indonesia stock exchange (idx) in the period 2014-2018. By using purposive sampling method, there were 24 companies as the research’s sample. The type of data used is secondary data and used is panel regression analysis. The results of this study indicate that foreign ownership, cash holding and debt maturity has no significant effect on financial performance, only leverage has significant effect on financial performance

Why Do Cities Hoard Cash? Determinants and Implications of Municipal Cash Holdings

2009 ◽  
Vol 84 (1) ◽  
pp. 183-207 ◽  
Author(s):  
Angela K. Gore
Keyword(s):  
Cash Holdings ◽  
Agency Problems ◽  
City Manager ◽  
State Revenue ◽  
Excess Cash ◽  
Administrative Expenses ◽  
Manager Incentives

ABSTRACT: This study examines the determinants of municipal cash holdings and the implications of holding high levels of cash. The first part of the analysis investigates municipal manager incentives to accumulate cash as part of normal operations. Results indicate that municipalities with a higher variation in revenues, fewer sources of revenues, and higher growth accumulate more cash. Larger governments and those receiving relatively more state revenue accumulate less cash. Further analysis considers whether high levels of cash indicate agency problems, and finds municipalities with high cash holdings spend more on administrative expenses, city manager salaries, and bonuses. I find no evidence that municipalities with excess cash reduce taxes. The presence of staggered councils and councils that are not independent tend to exacerbate excessive cash holdings. These results are consistent with the proposition that municipalities with high cash levels have agency problems relative to those with lower cash holdings.

Finance, corporate value and credit market freedom in overinvesting US firms

2020 ◽  
Vol 20 (6) ◽  
pp. 1053-1072
Author(s):  
Alfonsina Iona ◽  
Marco Alberto De Benedetto ◽  
Dawit Zerihun Assefa ◽  
Michele Limosani
Keyword(s):  
Corporate Finance ◽  
Firm Value ◽  
Cash Holdings ◽  
Agency Problems ◽  
Credit Market ◽  
The State ◽  
Corporate Value ◽  
Content Type ◽  
External Finance ◽  
The Relationship

Purpose Using a sample of US firms more likely to be affected by agency problems, the purpose of this paper is to investigate the relationship between corporate value and financial policies and to study whether credit market freedom (CMF) affects this relationship. Design/methodology/approach The authors identify a sub-sample of non-financial US firms potentially affected by agency problems using a joint criterion of over-investment and high cash-holdings. A generalized method of moment econometric framework is then used to estimate the impact of cash-holdings and leverage policies on firm value for this sub-sample. This exercise is also performed by taking into account the level of CMF of the state where the firm operates. Findings The results show that the relationship between cash-holdings – or leverage – and firm value is “U-shaped.” In addition, when the authors focus on the role played by the level of CMF, the authors find a number of interesting facts: CMF facilitates the firms’ access to external finance, thereby relaxing the need of internal funds for investing; the relationship between cash-holdings and firm value is “U-shaped” only in states enjoying high levels of CMF; the probability of observing firms more likely to be affected by agency problems is higher in states with high levels of CMF. Research limitations/implications The empirical findings provide important insights to policymakers, shareholders and practitioners. To policymakers, the results suggest that providing institutional environments with greater CMF can enhance the firm access to external finance, the level of corporate investment and the economic growth. To shareholders, the findings highlight that the conflicts of interest between managers and shareholders may be more severe in states with higher CMF; therefore, adequate financing policies and corporate governance mechanisms must be used to mitigate these conflicts and maximize the firm value. Finally, to practitioners, the evidence suggests that, in valuing a firm, they must take into consideration whether the economic environment provides managers with more freedom to stockpile cash and invest sub-optimally. Originality/value The paper contributes to the corporate finance and governance literature in two respects. First, it provides new evidence on the shape of the relationship between cash holdings and firm value for firms affected by empire-building managers. Second, at the best of the knowledge, it is the first corporate finance study, which analyzes the role played by the CMF at the state level on the capital structure and the level of investment of the firms.

Information Shocks and Corporate Cash Policies

2020 ◽  
Vol 19 (1) ◽  
pp. 5-28
Author(s):  
C. S. Agnes Cheng ◽  
Yuan Huang ◽  
Xiao Li
Keyword(s):  
Insider Trading ◽  
Cash Holdings ◽  
Agency Problems ◽  
Information Environment ◽  
Precautionary Savings ◽  
Difference In Differences ◽  
Private Benefit ◽  
Mandatory Adoption ◽  
Cash Policies ◽  
Jel Classifications

ABSTRACT We examine how information environment affects corporate cash policy by examining the change in cash holdings around two events that lead to exogenous change in information environment, namely the initial enforcement of insider trading laws (ITLs) and the mandatory adoption of IFRS in European Union (EU) countries. Using a difference-in-differences approach, we find that firms decrease their cash holdings after both events. The decrease in cash holdings is more pronounced for firms with higher precautionary savings demand and with more severe agency problems. Additional tests show that the sensitivity of investment to cash holdings declines after the two events, consistent with the notion that the benefit of cash holdings in mitigating underinvestment and the private benefit of overinvesting cash holdings reduce after the events. Overall, our findings provide evidence that information environment improvements have real decision effects. JEL Classifications: M41; M48; G31.

Negative operating cash flows and investment inefficiency

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chris Harris ◽  
Zhe Li
Keyword(s):  
Corporate Governance ◽  
Intangible Assets ◽  
Cash Holdings ◽  
Agency Problems ◽  
Cash Flows ◽  
Publicly Traded ◽  
Content Type ◽  
Operating Cash Flows ◽  
The Relationship ◽  
Practical Implications

PurposeThe purpose of this paper is to identify whether negative operating cash flows are related to investment inefficiency, and specifically whether they are related to subsequent overinvestment and if this relationship is driven by agency problems within the firm.Design/methodology/approachThe study conducts fixed effect regressions, testing the relationship between negative operating cash flows and the firm’s subsequent investment inefficiency. The relationship is further examined for all firms based on size, corporate governance and cash holdings – all of which are related to agency problems.FindingsThe proportion of firms reporting negative operating cash flows has been increasing over time and is positively related to subsequent investment inefficiency. This increase is explained not only by the rise in investment of intangible assets. The positive relationship is not explained by the firm size or corporate governance, but is related to cash holdings. These results are consistent across four different measures of firm investment.Practical implicationsThe percentage of publicly traded firms with negative operating cash flows has never been higher. This paper is one of the first to identify factors that may be contributing to this rise.Originality/valueThis study extends prior findings by identifying previously unexplored factors related to the rise in firms with negative operating cash flows. The rise in investment of intangible assets does not explain the increase alone. High cash holdings also influence the rise in negative operating cash flows.

Cash holdings and corporate governance: theory and contrary evidence from hotel firms

2018 ◽  
Vol 30 (10) ◽  
pp. 3117-3134 ◽  
Author(s):  
Tarik Dogru ◽  
Ercan Sirakaya-Turk
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Agency Problems ◽  
High Growth ◽  
Cash Flows ◽  
Governance Mechanisms ◽  
Growth Opportunities ◽  
Content Type ◽  
Corporate Governance Mechanisms

Purpose The purpose of this study is to examine the extent to which the quality of corporate governance mechanisms and growth opportunities affect agency problems in hotel firms. Design/methodology/approach The effects of cash flows on investments and cash holdings were analyzed using three-stage least square analysis to determine the extent to which agency problems are due to the quality of corporate governance in hotel firms. Findings The findings showed that the effects of cash flows on investments and cash holdings were greater in well-governed hotel firms than in poorly governed hotel firms. These effects were also greater in low-growth hotel firms than in high-growth hotel firms. However, the results from a concurrent examination of the quality of corporate governance and growth opportunities showed that poorly governed hotel firms with low-growth opportunities are exposed to agency problems. Research limitations/implications These results suggest that neither corporate governance mechanisms nor growth opportunities alone indicate agency problems. Theoretical implications are discussed within the realms of free cash flow theory and growth hypothesis. Practical implications High-growth hotel firms should retain all of their cash and cash flows to undertake value-increasing projects when they become available. Shareholders’ wealth is more likely to be maximized in high-growth firms regardless of the quality of corporate governance. Originality/value Although various aspects of corporate governance have been investigated in hospitality literature, previous studies did not examine the concurrent effects of corporate governance and growth opportunities on agency problems.

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