How does Buddhism affect corporate cash holdings?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yaoqin Li ◽  
Xichan Chen ◽  
Wanli Li ◽  
Xixiong Xu
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Institutional Ownership ◽  
Religious Culture ◽  
Legal Institutions ◽  
Governance System ◽  
Heckman Selection Model ◽  
Content Type ◽  
The Impact ◽  
Corporate Cash Holdings

PurposeThis study explores whether and how Buddhism impacts corporate cash holdings. Buddhist culture affects investors' perception of how cash is deployed and then influences corporate cash holdings. This study first examines the impact of Buddhism on corporate cash holdings and then investigates whether formal governance mechanisms such as legal institutions and institutional ownership influence the relationship between Buddhism and corporate cash holdings.Design/methodology/approachThe authors conduct empirical tests with data on Chinese listed companies between 2006 and 2019. Buddhism is measured with the natural logarithm of the number of Buddhist temples within a radius of a certain distance around a firm's headquarters. The authors adopt the OLS method to regress and take the 2SLS method, Heckman selection model and FEVD approach to address the endogeneity issue.FindingsThe results show a positive relationship between Buddhism and corporate cash holdings. This positive relation is more prominent for firms located in regions with weak legal institutions and for firms with low institutional ownership. Further analysis shows that Buddhism works through the channel of alleviating agency problems and finally improves the value of cash to investors.Research limitations/implicationsThe authors’ findings have important implications. First, this study provides inspiration for incorporating the ethical values of traditional cultures, such as Buddhism, into the corporate governance system. Second, the findings imply that informal institutions can influence corporate financial decisions beyond the effect of formal institutions, suggesting that informal systems should be emphasized when dealing with business affairs in countries where legal institutions are relatively weak. Third, the results suggest the significance of encouraging research on religious culture to explore its active role in corporate governance.Originality/valueThis study illustrates the positive value of religious culture in advancing corporate governance by relating Buddhism to corporate cash holdings based on the explanation of investors' perception. It makes a marginal contribution to the literature that investigates the determinants of cash policies and explores the firm-level consequences of religious culture, adding to the research area of culture and corporate finance.

Corporate Governance and Cash Holdings

2021 ◽  
pp. 305-321
Author(s):  
Ahmed Hassanein
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Opportunistic Behavior ◽  
Governance System ◽  
Firm Level ◽  
Corporate Managers ◽  
Country Level ◽  
Corporate Governance System ◽  
The Impact ◽  
Corporate Cash Holdings

Corporate cash induces the opportunistic behavior of corporate managers that can create an agency problem. A corporate governance system controls the opportunistic behavior of managers and can affect the firm's policy on holding cash. This study explains how the aspects of corporate governance, country-level and firm-level governance, can affect the corporate policy on holding cash. First, the study provides the nature, definition, and importance of corporate cash holdings. Second, it outlines various motivations and theories behind holding corporate cash. Third, it explains the relation between firm-level governance and corporate cash holdings. Fourth, it focuses on the impact of firm-specific governance attributes on the level of corporate cash holdings. Fifth, it presents the relation between country-level governance and corporate cash holdings.

scholarly journals Does executive ownership lead to excess target cash? The case of UK firms

2017 ◽  
Vol 17 (5) ◽  
pp. 876-895 ◽  
Author(s):  
Alfonsina Iona ◽  
Leone Leonida ◽  
Alexia Ventouri
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Cash Holdings ◽  
Logit Analysis ◽  
Governance Mechanism ◽  
Governance System ◽  
Content Type ◽  
Excess Cash ◽  
The Uk ◽  
The Impact

Purpose The aim of this paper is to investigate the dynamics between executive ownership and excess cash policy in the UK. Design/methodology/approach The authors identify firms adopting an excess policy using a joint criterion of high cash and cash higher than the target. Logit analysis is used to estimate the impact of executive ownership and other governance characteristics on the probability of adopting an excess cash policy. Findings The results suggest that, in the UK, the impact of the executive ownership on the probability of adopting an excess cash policy is non-monotonic, in line with the alignment-entrenchment hypothesis. The results are robust to different definitions of excess cash policy, to alternative specifications of the regression model, to different estimation frameworks and to alternative proxies of ownership concentration. Research limitations/implications The authors’ approach provides a new measure of the excess target cash for the firm. They show the need to identify an excess target cash policy not only by using an empirical criterion and a theoretical target level of cash, but also by capturing persistence in deviation from the target cash level. The authors’ measure of excess target cash calls into questions findings from previous studies. The authors’ approach can be used to explore whether excess cash holdings of UK firms and the impact of managerial ownership have changed from before the crisis to after the crisis. Practical implications The authors’ measure of excess target cash allows identifying in practice levels of cash which are abnormal with respect to an equilibrium level. UK firms should be cautious in using executive ownership as a corporate governance mechanism, as this may generate suboptimal cash holdings and suboptimal firm value. Excess cash policy might be driven not only by a poor corporate governance system, but also by the interplay between agency costs of managerial opportunism and cost of the external finance which further research could explore. Originality/value Actually, “how much cash is too much” is a question that has not been addressed by the literature. The authors address this question. Also, this amount of cash allows the authors to study the extent to which executive ownership contributes to explain the out-of-equilibrium persistency in the cash level.

Sales order backlog and corporate cash holdings

2020 ◽  
Vol 28 (3) ◽  
pp. 351-371
Author(s):  
Kailing Deng ◽  
Linda Nichols ◽  
Li Sun
Keyword(s):  
Corporate Governance ◽  
Performance Indicator ◽  
Cash Holdings ◽  
Content Type ◽  
Precautionary Motive ◽  
Research Questions ◽  
The Impact ◽  
The Relationship ◽  
Corporate Cash Holdings

PurposeWe examine the impact of sales order backlog (an important leading performance indicator) on corporate cash holdings and the role of corporate governance in the relation between sales order backlog and cash holdings.Design/methodology/approachWe use the regression analysis to examine our research questions.FindingsConsistent with the agency motive and the precautionary motive of cash holdings, we document a significant negative relation between order backlog and cash, suggesting that firms with higher order backlog hold less cash. We further examine and find that the relationship between order backlog and cash becomes stronger for firms with stronger corporate governance, highlighting the role of governance in determining the level of corporate cash holdings.Originality/valueOur study contributes to the accounting literature on sales order backlog and the finance literature on corporate cash holdings. In particular, our study contributes to developing a more comprehensive understanding of the sales order backlog because it is still an under-researched area in accounting. To the best of our knowledge, this study is perhaps the first empirical study that examines the direct link between order backlog and cash.

The effect of the adoption of an alternative corporate governance system on firms’ performances

2016 ◽  
Vol 35 (4) ◽  
pp. 517-529 ◽  
Author(s):  
Carlo Bellavite Pellegrini ◽  
Bruno S. Sergi ◽  
Emiliano Sironi
Keyword(s):  
Corporate Governance ◽  
Propensity Score ◽  
Performance Outcomes ◽  
Corporate Law ◽  
Law Reform ◽  
Governance System ◽  
Content Type ◽  
Alternative System ◽  
The Impact ◽  
Board System

Purpose – Alternative corporate governance systems (CGSs) have attracted a significant bulk of research recently. While the connection between the adoption of an alternative system (one tier board or two tier board system) and firms’ performances has not been fully analysed yet, the purpose of this paper is to analyse whether companies which have turned into an alternative board system have eventually improved their performance over time. Design/methodology/approach – Using a sample of more than 15,000 Italian unlisted joint stock companies, the authors compare performance outcomes in 2009 of firms adopting alternative systems with performances of firms that maintained the system in force before the 2003 Corporate Law Reform (defined as “traditional”). Because of the choice of an alternative system (one tier or two tier board) instead of a traditional one is not random, the authors reduce selection bias implementing matching methods and comparing firms that are close in terms of propensity score measured in 2003 (the year before the new CGSs have been introduced by a corporate law reform). Findings – The authors do not find evidence of a significant improvement of performances in 2009 concerning those firms that have adopted a one tier or two tier board systems with respect to those which maintained a traditional one. Originality/value – The novelty of the study concerns the application of propensity score matching for the evaluation of the impact of the change of the CGS that is possible in presence of two conditions that are all verified in our setting: first, to have a country where corporate law allows for choosing among different systems; in this case Italy is a good laboratory, because it allows for the choice among three different systems; and second, to have the opportunity to evaluate the effect of the change in light of a relatively recent “pre-treatment” condition; this is made possible by the fact that before the 2003 Reform of corporate law all the companies had a traditional system.

The impact of corporate governance on the relationship between earnings management and CEO compensation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Oheneba Assenso-Okofo ◽  
Muhammad Jahangir Ali ◽  
Kamran Ahmed
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Ceo Compensation ◽  
Empirical Support ◽  
Vital Role ◽  
Governance System ◽  
Content Type ◽  
Governance Practices ◽  
The Impact ◽  
The Relationship

PurposeThe study examines whether corporate governance moderates the relationship between CEO compensation and earnings management.Design/methodology/approachThe study uses 1,800 firm-year observations from 2005 to 2010 and employ multiple regression analyses and other sensitivity tests.FindingsThe study finds a positive relationship between CEO compensation and earnings management. The study’s results also suggest that CEO bonus compensation increases in relation to earnings management and therefore the study infers that managers may become involved in earnings management to increase their compensation. However, the study finds that the relationship is moderated by a strong corporate governance system which reduces the impact of earnings management on CEO compensation.Research limitations/implicationsThe study is conducted in a specific context, and therefore it may be subject to a set of limitations. The study emphasises exclusively on whether executives manage earnings to increase their compensation. The study does not consider the issue of several other and potentially contradictory motivations here.Practical implicationsThe study’s findings highlight potential implications and offer useful propositions for stakeholders, particularly accounting and corporate governance regulators, to consider. The findings offer a basis for the accounting professions to further discuss and improve accounting standards to provide adequate regulations and monitoring to decrease managerial opportunistic behaviours in earnings manipulations. The findings also emphasise the need for appropriately designed CEO compensation packages in such a manner that improves the manager–shareholder alignment and reduces the information asymmetry problem. The results signify that corporate governance plays a vital role in mitigating the relationship between CEO compensation and earnings management.Originality/valueThis study adds to the existing literature by documenting empirical support on the link between earnings management and CEO compensation against a backdrop of high demand for strong corporate governance practices.

The impact of corporate environmental responsibility on corporate cash holdings: evidence from the most polluting listed companies in China

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jia Liao ◽  
Liping Zheng ◽  
Yu Yuan
Keyword(s):  
Environmental Protection ◽  
Emerging Market ◽  
Cash Holdings ◽  
Listed Companies ◽  
Environmental Responsibility ◽  
Corporate Environmental Responsibility ◽  
Content Type ◽  
Value Of Cash ◽  
The Impact ◽  
Corporate Cash Holdings

PurposeThe purpose of this paper is to examine the impact of corporate environmental responsibility (CER) on corporate cash holdings. This paper also investigates the moderating effects of ownership type and institutional environment between CER and corporate cash holdings.Design/methodology/approachThis study uses the data of the most polluting listed companies on the Shanghai and Shenzhen stock exchange markets over the period 2010–2019. CER data from Hexun.com (a professional CSR evaluation system) are used to measure CER performance. Two proxies are used to measure the level of cash holdings simultaneously, where CASH1 is calculated as the ratio of cash and cash equivalents to total assets, and CASH2 is calculated as the ratio of cash and cash equivalents to net assets (total assets minus cash and cash equivalents). Finally, multiple regression analysis is applied to test the research hypotheses.FindingsThe results show that environmentally responsible companies hold substantially less cash, and the result is statistically significant and robust even after using firm fixed effects and applying alternative measures of cash holdings or alleviating potential endogeneity. In addition, the results of cross-sectional tests show that the negative relation between CER and corporate cash holdings is concentrated among non-state-owned enterprises, and firms in provinces with more developed institutions. Furthermore, the result of the analysis of the economic consequence shows CER significantly increases the value of cash holdings.Research limitations/implicationsThis study focuses on China's institutional context, which limits the generalizability of the findings to other countries. However, the objective of this research can be studied in other institutional settings, so the above limitations provide a springboard for further research. Furthermore, the environmental protection investment, green technology innovation, and even pollutant discharge of companies can also be important indicators to measure the performance of firms in fulfilling their environmental responsibilities, which can be considered in future research.Practical implicationsThe findings of this study may help company management in China to establish a correct view of environmental responsibility to achieve corporate value creation and corporate sustainability. And our research can also provide the policy reference value for the Chinese government to further improve environmental protection policies and systems, guide enterprises to conduct green production to realize the country's vision of an environmentally friendly society.Originality/valueBased on the current background that countries in the world advocate the development of a green economy, this is the first study to examine the impacts of the environmental responsibility of the most polluting companies on corporate cash holdings and the value of cash holdings in the context of China, an emerging market.

Corporate cash holdings, firm performance and national governance: evidence from emerging markets

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Imad Jabbouri ◽  
Hamza Almustafa
Keyword(s):  
Firm Performance ◽  
Emerging Markets ◽  
Cash Holdings ◽  
Content Type ◽  
Dynamic Framework ◽  
Institutional Settings ◽  
The Impact ◽  
The Relationship ◽  
Corporate Cash Holdings

PurposeThis paper aims to document the impact of corporate cash holdings on firm performance in Middle East and North African (MENA) emerging markets. The authors also examine how the quality of national governance shapes the interaction between corporate cash holdings and firm performance.Design/methodology/approachThe authors employ data from non-financial firms listed on the stock markets of twelve MENA countries between 2004 and 2018. The empirical model avoids the shortcomings of the prior literature by applying a dynamic framework to the relationship between cash holdings and firm performance.FindingsThis research reports a significant positive relationship between corporate cash holdings and firm performance. The results appear to be more pronounced in countries with strong national governance and more developed institutional settings. The findings demonstrate that most benefits of corporate cash holdings can be achieved under strong institutional settings. The authors argue that the positive impact that national governance has on individual firms by reinforcing investors' protection and lowering agency problems increases the added value of cash holdings.Practical implicationsThe findings should encourage local authorities and policymakers to reinforce the law and instigate new regulations to strengthen the quality of national governance and restore the integrity of local markets.Originality/valuePrior studies have largely been silent on how national governance can shape the relationship between corporate cash holdings and firm performance. This paper draws attention to this issue within the context of MENA emerging markets. To the authors' best knowledge, this is the first study that explores the interaction between cash holdings, firm performance and national governance in MENA emerging markets.

The impact of ownership structure on the cost of equity in emerging markets

2020 ◽  
Vol 43 (10) ◽  
pp. 1221-1239
Author(s):  
Saad Faysal ◽  
Mahdi Salehi ◽  
Mahdi Moradi
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Institutional Ownership ◽  
Managerial Ownership ◽  
Cost Of Equity ◽  
Asian Countries ◽  
Content Type ◽  
The Cost ◽  
The Impact

Purpose The purpose of this study is to cover the ownership structure as (institutional ownership and managerial ownership) influencing the cost of equity in emerging markets. Design/methodology/approach The authors applied the regression model with the fixed-effect model in the data. Data collected from listed companies in the Iraq-Iran Stock Exchange during 2012-2017. Findings The authors found a significant positive associated between institutional ownership and the cost of equity in the Iranian and Iraqi contexts. The results also reveal a significant negative associated between managerial ownership with the cost of equity in the Iranian and Iraqi contexts. This means that when managerial ownership is increased, the cost of equity will be reduced. These results support the role of inside ownership to enhance fixed performance by reducing the cost of equity. So, managerial ownership can be a substitute for all shareholders. Moreover, the results indicate a similarity in the impact of the ownership structure on the cost of equity in the Iraqi and Iranian context, this means the similar elements among west Asian countries. Research limitations/implications Financial companies such as banks and investment companies were not listed due to the difference in the nature of their work with the other sectors in the Iranian and Iraqi stock exchanges. Moreover, the authors are heavily constrained as listed companies must continue during the study period to calculate the cost of equity. Therefore, the results are difficult to generalize widely. Practical implications This international study will enable investors in, as well as local and international investors to take the appropriate investment decision-making in the capital markets in these countries (Iraq and Iran). Moreover, it contributes significantly to helping corporate governance bloggers in Iraq and Iran understand the role of the ownership structure in corporate governance. Originality/value This is the first study of the interaction between institutional ownership, managerial ownership with the cost of equity in Iraq, the study will help complete the knowledge gap with developed markets. The results are important in future research because the authors believe that it is very important for the future to look at better for percentage levels of institutional and managerial ownership in the company ownership. Although the contribution is limited, it will provide a useful guide for more papers in other west Asian countries.

Sustainable corporate governance and new auditing issues: a preliminary empirical evidence on key audit matters

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Pietro Fera ◽  
Michele Pizzo ◽  
Rosa Vinciguerra ◽  
Giorgio Ricciardi
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Corporate Sustainability ◽  
Quantitative Methodology ◽  
Audit Process ◽  
Governance System ◽  
Content Type ◽  
Corporate Governance System ◽  
The Impact

Purpose This paper aims to investigate the relationship between the quality of internal corporate governance mechanisms and the audit issues disclosed by external auditors in their report, assuming the beneficial effect related to the adoption of a sustainable corporate governance system. Design/methodology/approach This paper investigates the impact of the International Auditing and Assurance Standards Board’s ISA 701 in the European context as a new auditing principle supporting the key audit matters (KAMs) in reporting and disclosing auditing activities. The analysis is carried out through a quantitative methodology using a sample composed of non-financial companies listed on the Italian Stock Exchange. Findings Empirical findings highlight that firms having a high quality and sustainable corporate governance system tend to have fewer KAMs arising from the audit process and then disclosed in the audit report. To ensure the reliability of the empirical analysis, the authors controlled for a set of variables that could affect the audit function and for the mediating role of the overall business complexity (as proxied by the firm size). Originality/value This study is of interest to academics, practitioners and regulators, as it highlights the role of a higher quality internal corporate governance on the perceived corporate riskiness and complexity. It contributes to the recent debate on sustainable corporate governance, corporate sustainability and auditing streams.

Female directors and corporate cash holdings: monitoring vs executive roles

2019 ◽  
Vol 58 (2) ◽  
pp. 295-312 ◽  
Author(s):  
Domenico Rocco Cambrea ◽  
Paolo Tenuta ◽  
Vincenzo Vastola
Keyword(s):  
Fixed Effects ◽  
Gender Diversity ◽  
Cash Holdings ◽  
Listed Companies ◽  
Management Decision ◽  
Content Type ◽  
Female Directors ◽  
Cash Reserves ◽  
The Impact ◽  
Corporate Cash Holdings

Purpose The purpose of this paper is to investigate the impact of gender diversity on corporate cash holdings by scrutinizing different positions covered by female board directors. Design/methodology/approach The paper examines a sample of Italian listed companies between 2006 and 2015. Fixed-effects regressions are employed as the base empirical methodology. In addition, because the link between corporate governance variables and cash may suffer from endogeneity issues, the study employs several tests to control for this potential problem. Findings The empirical findings demonstrate that the relationship between gender diversity and cash holdings depends on the role of female directors on the boards. Specifically, the evidence shows that women in monitoring functions, ruled by independent directors and female chairs, led to a decrease in cash reserves. Conversely, companies managed by female CEOs have larger cash holdings. Research limitations/implications The paper refers to Italian listed companies only and does not analyze whether and how the financial crisis has affected the link between female directors and cash reserves. Practical implications The study provides insights for the diverse effects of female directors on cash management decision and contributes to the debate on gender diversity capabilities for improving firm financial flexibility. Originality/value This paper is the first empirical study to attempt to disentangle the effect of gender diversity on cash holdings. It sheds light on the consequences of appointing female directors on cash policies and explores the Italian context after the introduction of the gender quotas law.

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