Oil price uncertainty and corporate cash holdings: Global evidence

This study investigates the effects of oil price uncertainty on corporate cash holdings using large international publicly listed firms from 89 countries for the period 1990–2017. Building on the precautionary motive of cash and the trade-off theory, we argue that the oil price uncertainty has a significant impact on corporate cash holdings and this impact is nonlinear. First, we find that oil price volatility is positively associated with corporate cash holdings. However, we then find evidence that shows that the association between oil volatility and cash holdings exhibits a U-shape. Finally, we present evidence that the positive relationship between oil price uncertainty and corporate cash holdings is more pronounced in firms operating in oil-exporting countries and in oil-exposed industries. Overall, our findings support our predictions and are robust to multiple robustness tests.     

Economic policy uncertainty and corporate inventory holdings: evidence from China

We investigate the impact of economic policy uncertainty (EPU) on corporate inventory holdings in China over the period 2007–2017. We find that EPU leads firms to significantly reduce inventory holdings and this effect is particularly pronounced among non-state-owned enterprises. The adjustment of inventory holdings enhances firms’ operating and market performance consequently. In addition, firms with greater financial constraints or stronger external governance are more affected by EPU. Further exploration shows that EPU induces high precautionary cash holdings, which crowds out inventories. Our results illustrate that firms reallocate between inventories and cash to cope with uncertainty associated with economic policy changes.     

The effect of financial constraints,investment policy,product market competition and corporate governance on the value of cash holdings

This study empirically investigates the value shareholders place on excess cash holdings and how shareholders’ valuation of cash holdings is associated with financial constraints, firm growth, cash‐flow uncertainty and product market competition for Australian firms from 1990 to 2007. Our results indicate that the marginal value of cash holdings to shareholders declines with larger cash holdings and higher leverage. However, firms that are more financially constrained, that have higher growth rates and that face greater uncertainty exhibit a higher marginal value of cash holdings. These findings are consistent with the explanation that excess cash holdings are not necessarily detrimental to firm value. Firms with costly external financing and that also save more cash for current operating and future investing needs find that the market values these cash hoarding policies favourably. Finally, there is limited evidence of an association between various corporate governance measures and the value of cash holdings for a shorter sample period.     

Operating lease obligations and corporate cash management

Our study addresses two issues overlooked in prior research: Does a firm's future operating lease obligations influence its current cash holdings? Does this relationship contribute to the temporal increase in corporate cash holdings? We provide evidence that these future obligations significantly influence a firm's cash holdings and contribute to the temporal increase in U.S. corporate cash holdings. Consequently, our findings are consistent with the options offered by operating leases to young growing firms and the effect of these operating lease obligations on the firm's operating leverage.     

Employee protection shocks and corporate cash holdings

We examine the relation between employee protection legislation and corporate cash holdings. Our rationale rests on the notion that higher labor adjustment costs increase a firm's operating leverage making firms to adjust their liquidity management by increasing precautionary savings. Consistent with this, we show that the staggered passage of legal exceptions to the “at-will” employment doctrine in various U.S. states led to an average increase in cash holdings by 7.2%. Cash increases are higher when unionization rates and industry concentration are lower, and when industry discharge rates and volatility is higher. Consistent with the financial flexibility argument of tighter employment protection increasing corporate cash needs, the value of cash increases after the passage of pro-labor regulations. Moreover, we find that the increase in the value of cash is especially pronounced for financially constrained firms.     

Corporate cash holdings,agency problems,and economic policy uncertainty

Consistent with the agency view of cash holdings, we document a strong negative relationship between economic policy uncertainty and corporate cash holdings for non-U.S. firms from 19 countries. Our results are robust to different measures of cash holdings and model specifications and survive after addressing endogeneity. We provide evidence that the decrease in cash holdings is moderated by shareholders' ability to force managers to disgorge cash that fits consistently within the agency framework. Overall, results suggest that lowering cash holdings help alleviate agency problems in the presence of policy uncertainty and underscore the significance of country attributes in corporate finance.     

Cash-rich firms and carbon emissions

We investigate whether corporate cash holdings affect carbon dioxide emissions. Using a sample of 5402 firm-years observations from 943 U.S. firms during 2007–2017, we find that carbon emissions are lower in firms with higher corporate cash holdings. The effect of cash holdings on carbon emissions is more pronounced in firms with low leverage and less financial constraints. Our channel analysis further unveils that renewable energy consumption and carbon abatement investment are higher in cash-rich firms, which transmit lower carbon emissions. Our findings are robust to different identification strategies and alternative measures of cash holdings and carbon emissions. Overall, our paper provides novel evidence on the role of corporate cash holdings in mitigating carbon emissions.     

融资约束、审计费用与现金持有价值

审计费用和现金持有价值是公司财务审计研究领域的两个重要话题。审计费用高低所隐含的公司风险程度影响着投资者对公司增加现金持有量将产生积极还是消极效应的判断,会导致公司股票超额回报率的变化,进而也可能影响其现金持有价值,目前尚无相关的研究。本文以现金持有的边际价值模型为基础,引入审计费用和融资约束变量,对融资约束条件下审计费用与公司现金持有价值的关系进行研究后发现,过高的审计费用会降低公司的现金持有价值,审计费用增加得越多,公司的现金持有价值越低。进一步的分析发现,相对于其面临较高程度的融资约束时,公司面临较低程度的融资约束时审计费用对其现金持有价值的负向影响更为显著。     

Banking deregulation,consolidation, and corporate cash holdings: U.S. evidence

This paper tests the effects of banking deregulation on the cash policies of nonbanking firms in the United States. We document a significant and negative relation between intrastate banking deregulation and corporate cash holdings. We show that the negative relation is driven by financially constrained firms, especially by constrained firms with low hedging needs. Further, we construct indexes measuring the intensity of bank consolidation in local markets. We find that the intensity of in-market bank mergers is negatively related to corporate cash holdings. However, in-market bank mergers in highly concentrated markets tend to be positively related to corporate cash holdings.     

激进战略与企业现金持有——预防性动机还是代理动机

以2007-2016年A股非金融上市公司为样本,考察了公司战略激进程度对现金持有决策的影响,并从现金持有价值与竞争效应两个角度,探讨不同公司战略类型下现金持有经济后果的差异。研究结果显示：公司战略越激进,企业现金持有水平越高;并且战略越激进,现金持有价值越高,现金的竞争效应越强。进一步研究表明：随着融资约束和经济政策不确定性的提高,采取激进战略的公司,现金持有水平进一步提高。这说明公司战略是影响现金持有决策的重要因素,而战略激进的公司持有大量现金主要是出于预防性动机,而非代理动机。     

Corporate governance and the value of cash holdings

We investigate how corporate governance impacts firm value by comparing the value and use of cash holdings in poorly and well-governed firms. We show that governance has a substantial impact on value through its impact on cash: $1.00 of cash in a poorly governed firm is valued at only $0.42 to $0.88. Good governance approximately doubles this value. Furthermore, we show that firms with poor corporate governance dissipate cash quickly in ways that significantly reduce operating performance. This negative impact of large cash holdings on future operating performance is cancelled out if the firm is well governed.     

Share repurchases of initial public offerings: motives,valuation effects,and the impact of market regulation

This study investigates the motives and valuation effects of share repurchase announcements of German firms during the 1998–2008 period, addressing the question why initial public offering (IPO) firms repurchase shares soon after going public. While our focus is on IPO firms, we also examine the impact of firm size by differentiating between IPO and established DAX/MDAX firms and by analyzing the source of surplus cash holdings, that is, either from equity issuances or from operating cash flows. We further explore the impact of the regulatory environment. Our empirical analysis reveals significant differences between the IPO and DAX/MDAX subsamples regarding their repurchase motives, stock price performance, and explanatory factors. Standard corporate payout theories are essential in explaining the different valuation effects. Our empirical analysis suggests agency costs of free cash flow as the main reason for the observed valuation effects of both IPO and DAX/MDAX firms, yet for different reasons. While DAX/MDAX firms continuously generate high operating cash flows before and after repurchasing shares, IPO firms exhibit low operating cash flows during the entire period but large surplus cash holdings due to the mandatory equity issuance at their public offering. Overall, the repurchase decisions of IPO firms are best explained by the agency costs of cash holdings and the unique rules and regulations of the German stock exchange.     

Economic policy uncertainty and corporate cash policy: International evidence

I investigate the influences of economic policy uncertainty on corporate cash policy. The findings show that there is a positive association between economic policy uncertainty and cash holdings, as well as the propensity to save cash out of operating cash flow. Further analyses suggests that economic policy uncertainty affects corporate cash policy by influencing firms’ precautionary saving motives and the effect is larger when firms have difficulty in raising external finance. Using the new index developed by Baker et al. (2016), I extend the literature on economic policy uncertainty and show that it is an important macro-level factor in influencing corporate cash policy.     

Corporate cash holdings,foreign direct investment,and corporate governance

The determinants of corporate cash holdings in the context of corporate governance theories have recently been analyzed in the literature. In the present study, the behavior of corporate managers in countries with poor shareholder rights protection is more in conformity with the agency problem theory than other corporate governance theories. Also, smaller firms tend to hold larger cash balances relative to their total assets than their larger counterparts. Foreign Direct Investment (FDI) inflows in today's highly integrated capital markets act as substitutes for corporate cash holdings. When firms in G-7 countries are separated from the ones in other countries, FDI inflows demonstrate different effects on international corporate cash holdings: They are substitutes for cash holdings in the former group of countries but become complements for cash holdings by firms in the latter one.     

The effect of sovereign wealth funds on corporations: Evidence of cash policies in Singapore

This paper studies the monitoring role of sovereign wealth funds (SWFs). By using unique dataset from one of the largest SWF: Temasek holdings, we find that SWF’s presence has a positive effect on cash holdings of portfolio companies. The effect is more pronounced for well-governed firms, indicating that Temasek increases corporate cash holdings through its active role in corporate governance. We further find supportive evidence that Temasek ownership affects cash holdings by hoarding excess cash and reducing capital expenditure, especially within firms with good governance. Temasek’s discerning effect on cash policies highlights the effective monitoring role of sovereign wealth funds.     

Organization capital and corporate cash holdings

This paper investigates the relationship between organization capital and corporate cash holdings. We develop two competing hypotheses in relating organization capital with cash holding. Our analysis reveals that organization capital is related to high levels of cash holdings. Moreover, we find that the effect of organization capital on corporate cash holdings is stronger for firms experiencing high levels of financing constraint and cash flow risk. Our results remain robust to alternative measures of organization capital and corporate cash holdings, and are not driven by omitted variable bias or endogeneity issues. We also find that the positive relation between organization capital and cash holdings is not confounded by sample period or industry group. Overall, we provide robust evidence that supports the precautionary motive for corporate cash holding.     

Excess cash holdings and shareholder value

We examine the determinants of corporate cash holdings in Australia and the impact on shareholder wealth of holding excess cash. Our results show that a trade‐off model best explains the level of a firm’s cash holdings in Australia. We find that ‘transitory’ excess cash firms earn significantly higher risk‐adjusted returns compared to ‘persistent’ excess cash firms, suggesting that the market penalises firms that hoard cash. The marginal value of cash also declines with larger cash balances, and the longer firms hold on to excess cash. The results are consistent with agency costs associated with persistence in excess cash holdings.     

Financial crisis,shareholder protection and cash holdings

In this paper, I investigate the relationship between shareholder protection and corporate cash holdings under the impact of the global financial crisis. With a sample of 192,807 observations across 40 countries during the period 2002–2015, I find that the global financial crisis mitigates the controlling effect of shareholder protection on corporate cash holdings. In addition, this mitigating role is stronger in financially constrained firms. Overall, the results suggest that managers are more likely to expropriate shareholders through corporate liquidity policy during a financial crisis.     

Does board gender diversity affect corporate cash holdings?

This paper examines whether board gender diversity affects corporate cash holdings using S&P 1500 index firms in the US for the period 2006–2015. We document a significantly negative relationship between board gender diversity and cash holdings. We also find a strong negative effect of female independent directors consistent with monitoring function. Moreover, in accordance with the critical mass theory, we find a negative effect of female directors’ presence and voice on cash holdings. Our findings are robust to alternative econometric specifications, alternative measures of cash holdings and corporate governance, difference‐in‐differences, propensity score matching, and two‐stage least squares. This study offers useful insights into the current global debate on gender diversity and its implications for firms.     

Real asset liquidity,cash holdings,and the cost of corporate debt

We study the impact of the interplay between cash holdings and asset sales on the corporate debt spread. We allow cash holdings and asset sales to assist with both debt repayment and sequential investments. The interplay between cash holdings and asset sales leads to a convex relationship between credit spreads and the liquidity of the market for real assets. We use the 2008 financial crisis as a natural experiment and find that post-2008, the nonlinearity of the link between credit spreads and asset liquidity is pronounced, closely matching analytical predictions. This is especially acute for highly leveraged and low profitability firms.