International Evidence on Cash Holdings and Expected Managerial Agency Problems
University of Arizona - Department of Finance
Karl V. Lins
University of Utah - Department of Finance
The Review of Financial Studies, Vol. 20, Issue 4, pp. 1087-1112, 2007
This article uses managerial control rights data for over 5000 firms from 31 countries to examine the net costs and benefits of cash holdings. We find that when external country-level shareholder protection is weak, firm values are lower when controlling managers hold more cash. Further, when external shareholder protection is weak we find that firm values are higher when controlling managers pay dividends. Only when external shareholder protection is strong do we find that cash held by controlling managers is unrelated to firm value, consistent with generally prevailing U.S. and international evidence.
Keywords: G32, G34, G35Accepted Paper Series
Date posted: June 26, 2008
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