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

Chan, Howard W. H., Lu, Yufei and Zhang, Hong F. 2013, The effect of financial constraints, investment policy, product market competition and corporate governance on the value of cash holdings, Accounting and finance, vol. 53, no. 2, pp. 339-366, doi: 10.1111/j.1467-629X.2011.00463.x.

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Title The effect of financial constraints, investment policy, product market competition and corporate governance on the value of cash holdings
Author(s) Chan, Howard W. H.
Lu, Yufei
Zhang, Hong F.ORCID iD for Zhang, Hong F. orcid.org/0000-0001-9017-9646
Journal name Accounting and finance
Volume number 53
Issue number 2
Start page 339
End page 366
Total pages 28
Publisher Wiley - Blackwell Publishing Asia
Place of publication Richmond, Vic.
Publication date 2013-06
ISSN 0810-5391
1467-629X
Keyword(s) financial constraints
cash policy
Australian firms
Summary 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.
Language eng
DOI 10.1111/j.1467-629X.2011.00463.x
Field of Research 150299 Banking, Finance and Investment not elsewhere classified
Socio Economic Objective 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1 Refereed article in a scholarly journal
Persistent URL http://hdl.handle.net/10536/DRO/DU:30052858

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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Created: Wed, 05 Jun 2013, 14:22:06 EST by Aysun Alpyurek

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