Creditor Rights,Country Governance,and Corporate Cash Holdings |
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Authors: | Bruce Seifert Halit Gonenc |
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Institution: | 1. Department of Finance, Strome College of Business, Old Dominion University, Norfolk, VA;2. Department of Economics, Econometrics and Finance, Faculty of Economics and Business, University of Groningen, Groningen, The Netherlands |
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Abstract: | This study examines the impact of creditor rights and country governance on cash holdings using a sample of firms from 47 countries. We hypothesize that cash holdings are smaller when both creditor rights and country governance are high. In these circumstances firms will not need to hold as much cash for future investments needs (precautionary funds) because firms will expect that funds will be available in the future. Our findings support our hypothesis and hold for alternative definitions for cash holdings, different country samples, different definitions of governance and concerns about endogeneity. |
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