Anti-corruption,government intervention,and corporate cash holdings: Evidence from China |
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| Institution: | 1. School of Accounting, Economics and Finance, University of Wollongong, Australia;2. Department of Applied Finance and Actuarial Studies, Macquarie University, Australia;1. Southwestern University of Finance and Economics, China;2. Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden;1. Lingnan College, Sun Yat-sen University, PR China;2. Department of Statistics and Finance, University of Science and Technology of China, PR China;3. Fanhai International School of Finance and School of Economics, Fudan University, PR China;1. Bond Business School, Bond University, Australia;2. School of Public Finance and Taxation, Central University of Finance and Economics, China |
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| Abstract: | We use China as an example to examine how anti-corruption and government intervention shape corporate cash holding decisions. The findings show that firms in provinces with less government intervention (weak anti-corruption intensity) hold smaller (larger) cash reserves than those in provinces with more government intervention (strong anti-corruption intensity). Furthermore, we find that the positive relationship between government intervention and corporate cash holdings is alleviated as the anti-corruption intensity increases, and this alleviation effect is more prominent for state-owned enterprises (SOEs), firms in high intervention areas and firms without political connections. These findings support the argument that corruption-free and low intervention governments can benefit firms in making more profitable corporate decisions. |
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| Keywords: | Anti-corruption Government intervention Cash holdings |
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