Earnings Quality Effect on Corporate Excess Cash Holdings and Their Marginal Value |
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Authors: | Minshik Shin Jongho Shin Jaeik Lee |
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Affiliation: | 1. School of Business Administration, Kyungpook National University, Daegu, Korea;2. E-Hyun Accounting Co., Seoul, Korea |
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Abstract: | By using panel data from Korea’s listed firms, we find that firms with poor earnings quality are more likely to accumulate excess cash holdings, perhaps in an attempt to buffer themselves from information asymmetry problems. We also find that firms with poor earnings quality are more likely to discount the marginal value of their excess cash holdings because their shareholders appear to question the reason for such cash policy changes from the agency theory perspective. Overall, our results suggest that information asymmetry and agency problems are likely to co-exist in firms with poor earnings quality. |
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Keywords: | agency theory earnings quality excess cash holdings information asymmetry marginal value |
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