Do Corporate Cash Holdings Decrease the Impact of Tail Risk Spillovers from the Financial Sector? The European Evidence

2014 ◽  
Author(s):  
Wan-Chien Chiu ◽  
Juan Ignacio Peea ◽  
Chih-Wei Wang
Keyword(s):  
Cash Holdings ◽  
Financial Sector ◽  
Tail Risk ◽  
The Impact ◽  
Corporate Cash Holdings

scholarly journals The Impact of Inflation and Operating Cycle on the Corporate Cash Holdings in South-East Europe

2018 ◽  
Author(s):  
Aleksandar Naumoski ◽  
Péter Juhász
Keyword(s):  
Cash Flow ◽  
Financial Management ◽  
Cash Holdings ◽  
Governance Structure ◽  
Operating Cycle ◽  
East European ◽  
Explanatory Variables ◽  
South East Europe ◽  
The Impact ◽  
Corporate Cash Holdings

Determining optimal cash holding is one of the most crucial issues in the corporate financial management aiming to maximise the shareholder value. The optimum of corporate cash amount is not only dependent on many company-specific factors, but it is also associated with both the corporate governance structure and the institutional and macroeconomic environment. Earlier research papers showed that at the macro level, companies adjust their cash holdings to the changes in the level of the inflation and, at the micro level, to the changes of the operating cycle linked to the turnover of the corporate cash flow. This paper investigates the determinants of corporate cash holdings for a sample of 868 firms from ten South-East European countries (Bosnia and Herzegovina, Bulgaria, Montenegro, Croatia, Greece, Romania, Macedonia, Slovenia, Serbia and Turkey). More specifically, we investigate the influence of the inflation and the corporate operating cycle on the corporate cash holdings. Using company financial data and the country CPI for the period 2006-2015, we apply a balanced panel regression model involving the yearly change of the cash ratio as a dependent variable, and country CPI, operating cycle and other firm-specific control variables as explanatory variables.  Results confirm that both the inflation rate and the operating cycle have substantial influence on the change of the corporate cash holdings also in the region. The relationship of the change in cash and the inflation is non-linear and best described by a U-shaped curve. That means that corporate cash holdings decrease as the level of inflation increases to a critical point but beyond that, the cash holdings start to increase. At the same time, we identified a straight linear relationship between the change in cash holdings and the length of the operating cycle. Also, we found that the change in the corporate cash holdings is positively related to the size of the company, the operating cash flow and the capital expenditures. In addition, it is inversely associated with both the change of the net working capital and the change of short and long-term debt.

How does Buddhism affect corporate cash holdings?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yaoqin Li ◽  
Xichan Chen ◽  
Wanli Li ◽  
Xixiong Xu
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Institutional Ownership ◽  
Religious Culture ◽  
Legal Institutions ◽  
Governance System ◽  
Heckman Selection Model ◽  
Content Type ◽  
The Impact ◽  
Corporate Cash Holdings

PurposeThis study explores whether and how Buddhism impacts corporate cash holdings. Buddhist culture affects investors' perception of how cash is deployed and then influences corporate cash holdings. This study first examines the impact of Buddhism on corporate cash holdings and then investigates whether formal governance mechanisms such as legal institutions and institutional ownership influence the relationship between Buddhism and corporate cash holdings.Design/methodology/approachThe authors conduct empirical tests with data on Chinese listed companies between 2006 and 2019. Buddhism is measured with the natural logarithm of the number of Buddhist temples within a radius of a certain distance around a firm's headquarters. The authors adopt the OLS method to regress and take the 2SLS method, Heckman selection model and FEVD approach to address the endogeneity issue.FindingsThe results show a positive relationship between Buddhism and corporate cash holdings. This positive relation is more prominent for firms located in regions with weak legal institutions and for firms with low institutional ownership. Further analysis shows that Buddhism works through the channel of alleviating agency problems and finally improves the value of cash to investors.Research limitations/implicationsThe authors’ findings have important implications. First, this study provides inspiration for incorporating the ethical values of traditional cultures, such as Buddhism, into the corporate governance system. Second, the findings imply that informal institutions can influence corporate financial decisions beyond the effect of formal institutions, suggesting that informal systems should be emphasized when dealing with business affairs in countries where legal institutions are relatively weak. Third, the results suggest the significance of encouraging research on religious culture to explore its active role in corporate governance.Originality/valueThis study illustrates the positive value of religious culture in advancing corporate governance by relating Buddhism to corporate cash holdings based on the explanation of investors' perception. It makes a marginal contribution to the literature that investigates the determinants of cash policies and explores the firm-level consequences of religious culture, adding to the research area of culture and corporate finance.

Corporate Governance and Cash Holdings

2021 ◽  
pp. 305-321
Author(s):  
Ahmed Hassanein
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Opportunistic Behavior ◽  
Governance System ◽  
Firm Level ◽  
Corporate Managers ◽  
Country Level ◽  
Corporate Governance System ◽  
The Impact ◽  
Corporate Cash Holdings

Corporate cash induces the opportunistic behavior of corporate managers that can create an agency problem. A corporate governance system controls the opportunistic behavior of managers and can affect the firm's policy on holding cash. This study explains how the aspects of corporate governance, country-level and firm-level governance, can affect the corporate policy on holding cash. First, the study provides the nature, definition, and importance of corporate cash holdings. Second, it outlines various motivations and theories behind holding corporate cash. Third, it explains the relation between firm-level governance and corporate cash holdings. Fourth, it focuses on the impact of firm-specific governance attributes on the level of corporate cash holdings. Fifth, it presents the relation between country-level governance and corporate cash holdings.

scholarly journals The Effect of Leverage on Corporate Cash Holdings: Evidence from Indonesian Manufacturing Firms

2018 ◽  
Vol 9 (2) ◽  
pp. 61-72
Author(s):  
Anggita Langgeng Wijaya ◽  
Name Bandi
Keyword(s):  
Sampling Method ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Negative Influence ◽  
Manufacturing Firms ◽  
Manufacturing Companies ◽  
Multiple Regressions ◽  
The Impact ◽  
Corporate Cash Holdings ◽  
Study Hypothesis

The objective of this research is to test the impact of leverage on corporate cash holdings for sample of manufacturing companies enlisted on the Indonesian Stock Exchange over the period 2006-2007. Population of this research is all of manufacturing companies on the Indonesian Stock Exchange. The sampling method is purposive. The study hypothesis was tested using multiple regressions. The results show that leverage has a negative influence on corporate cash holdings. Indonesian manufacturing firms with high leverage can hold cash in small amounts because debt is a substitute for corporate cash holdings.

scholarly journals Risk Disclosure and Corporate Cash Holdings

2021 ◽  
Vol 14 (7) ◽  
pp. 328
Author(s):  
Issal Haj-Salem ◽  
Khaled Hussainey
Keyword(s):  
Impression Management ◽  
Negative Impact ◽  
Cash Holdings ◽  
Policy Implications ◽  
Annual Reports ◽  
Current Debate ◽  
Risk Disclosure ◽  
Related Information ◽  
The Impact ◽  
Corporate Cash Holdings

In this paper, we extend corporate disclosure and corporate cash holdings literature by testing whether corporate voluntary risk disclosure affects corporate cash holdings for a sample of Tunisian non-financial listed companies. As a measure of risk disclosure, we use manual content analysis to count the number of risk-related sentences in the narrative sections of corporate annual reports. As a measure of corporate cash holdings, we use the ratio of cash and cash equivalent over the total assets. Using a sample of 140 firm-year observations for the period of 2008–2013, we find that corporate risk disclosure has a negative impact on corporate cash holdings. Our results are consistent with agency, legitimacy and impression management theories. Our paper adds to the existing literature by being the first empirical evidence for the impact of risk disclosure on cash holdings. Our findings offer policy implications relevant for the current debate on the reliability of narrative risk disclosure and whether managers inform or obfuscate stakeholders by disclosing more risk-related information in their annual report narratives.

The impact of corporate environmental responsibility on corporate cash holdings: evidence from the most polluting listed companies in China

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jia Liao ◽  
Liping Zheng ◽  
Yu Yuan
Keyword(s):  
Environmental Protection ◽  
Emerging Market ◽  
Cash Holdings ◽  
Listed Companies ◽  
Environmental Responsibility ◽  
Corporate Environmental Responsibility ◽  
Content Type ◽  
Value Of Cash ◽  
The Impact ◽  
Corporate Cash Holdings

PurposeThe purpose of this paper is to examine the impact of corporate environmental responsibility (CER) on corporate cash holdings. This paper also investigates the moderating effects of ownership type and institutional environment between CER and corporate cash holdings.Design/methodology/approachThis study uses the data of the most polluting listed companies on the Shanghai and Shenzhen stock exchange markets over the period 2010–2019. CER data from Hexun.com (a professional CSR evaluation system) are used to measure CER performance. Two proxies are used to measure the level of cash holdings simultaneously, where CASH1 is calculated as the ratio of cash and cash equivalents to total assets, and CASH2 is calculated as the ratio of cash and cash equivalents to net assets (total assets minus cash and cash equivalents). Finally, multiple regression analysis is applied to test the research hypotheses.FindingsThe results show that environmentally responsible companies hold substantially less cash, and the result is statistically significant and robust even after using firm fixed effects and applying alternative measures of cash holdings or alleviating potential endogeneity. In addition, the results of cross-sectional tests show that the negative relation between CER and corporate cash holdings is concentrated among non-state-owned enterprises, and firms in provinces with more developed institutions. Furthermore, the result of the analysis of the economic consequence shows CER significantly increases the value of cash holdings.Research limitations/implicationsThis study focuses on China's institutional context, which limits the generalizability of the findings to other countries. However, the objective of this research can be studied in other institutional settings, so the above limitations provide a springboard for further research. Furthermore, the environmental protection investment, green technology innovation, and even pollutant discharge of companies can also be important indicators to measure the performance of firms in fulfilling their environmental responsibilities, which can be considered in future research.Practical implicationsThe findings of this study may help company management in China to establish a correct view of environmental responsibility to achieve corporate value creation and corporate sustainability. And our research can also provide the policy reference value for the Chinese government to further improve environmental protection policies and systems, guide enterprises to conduct green production to realize the country's vision of an environmentally friendly society.Originality/valueBased on the current background that countries in the world advocate the development of a green economy, this is the first study to examine the impacts of the environmental responsibility of the most polluting companies on corporate cash holdings and the value of cash holdings in the context of China, an emerging market.

The impact of competition and time-to-finance on corporate cash holdings

2020 ◽  
Vol 65 ◽  
pp. 101502 ◽  
Author(s):  
Mark Raun Moritzen ◽  
Alexander Schandlbauer
Keyword(s):  
Cash Holdings ◽  
The Impact ◽  
Corporate Cash Holdings
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