Cash holdings, corporate governance and financial constraints
Saddour, Khaoula; Ginglinger, Edith (2007), Cash holdings, corporate governance and financial constraints, EFMA 2007, 2007-06, Vienne, Autriche
TypeCommunication / Conférence
Conference titleEFMA 2007
MetadataShow full item record
Abstract (EN)We examine the relation between cash holdings, quality of governance and financial constraints. We find that firms with strong shareholder rights hold more cash, contrary to the predictions of agency theory. This result is partly due to the positive correlation that exists between governance quality measures and the degree of financial constraint faced by the firm. We show that governance quality has no impact on cash holdings by financially unconstrained firms. It does, however, have a positive impact on the cash holdings of certain financially constrained firms, particularly family firms. Anti-takeover provisions give these firms extra flexibility, enabling them to issue shares without the founding family losing control, and provide an alternative to high cash holdings.
Subjects / KeywordsGovernance; Financial Constraints; Cash Holdings
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