Corporate Cash Holdings and Agency Conflicts

30 Pages Posted: 13 Jul 2004

See all articles by Elion Jani

Elion Jani

University of Geneva - Geneva Finance Research Institute (GFRI)

Martin Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School

Andre Bender

University of Geneva - Hautes Études Commerciales (HEC-Genève)

Date Written: July 2004

Abstract

The paper explores the institutional context as a driving force of cash holdings, focusing on the role of ownership concentration, voting rights, growth opportunities, and information asymmetries. For this purpose, we use a sample of 128 Swiss firms for the period 1990-2000 as Swiss firms are characterized by high cash levels and concentrated ownership. Also, minority shareholders are poorly protected in Switzerland. Our results show that both the tradeoff and pecking order theories are at work. More importantly, we find that the institutional context substantially affects cash holding behavior as firms with less concentrated ownership retain more cash. Finally, firms with different voting right shares adjust more slowly than firms with simple and unique voting right structure.

Keywords: Cash holdings, ownership structure, agency conflicts, dual class shares, error correction model

JEL Classification: G32, G34

Suggested Citation

Jani, Elion and Hoesli, Martin Edward Ralph and Bender, Andre, Corporate Cash Holdings and Agency Conflicts (July 2004). Available at SSRN: https://ssrn.com/abstract=563863 or http://dx.doi.org/10.2139/ssrn.563863

Elion Jani (Contact Author)

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Martin Edward Ralph Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom
+41 22 379 8122 (Phone)
+41 22 379 8104 (Fax)

Andre Bender

University of Geneva - Hautes Études Commerciales (HEC-Genève) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland
+41 22 705 8135 (Phone)

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