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The Determinants and Marginal Value of Corporate Cash Holdings: Financial Constraints versus Corporate Governance

Posted: 16 Feb 2009 Last revised: 10 Sep 2017

Wenchien Liu

Chung Yuan Christian University - Department of Finance

Yuanchen Chang

National Chengchi University - College of Commerce

Date Written: February 13, 2009

Abstract

This article compares the influence of financial constraint and corporate governance on corporate cash holdings of publicly traded U.S. firms in the 1990-2006 periods. We find that firms with good governance hold more cash than firms with poor governance regardless of their financial constraints. Further, we find that cash holdings of financially constrained firms with good corporate governance are the highest. The impact of corporate governance on firm value is strong only when firms are financially constrained. Our results indicate that financial constraint is a more important determinant than corporate governance for corporate cash holdings.

Keywords: Corporate Cash Holdings, Corporate Governance, Financial Constraints

JEL Classification: G30, G32, G34

Suggested Citation

Liu, Wenchien and Chang, Yuanchen, The Determinants and Marginal Value of Corporate Cash Holdings: Financial Constraints versus Corporate Governance (February 13, 2009). Available at SSRN: https://ssrn.com/abstract=1342780 or http://dx.doi.org/10.2139/ssrn.1342780

Wenchien Liu

Chung Yuan Christian University - Department of Finance ( email )

200 Chung Pei Rd
Chung Li City, 32023
Taiwan

Yuanchen Chang (Contact Author)

National Chengchi University - College of Commerce ( email )

Taiwan
886229393091-81102 (Phone)
886229393394 (Fax)

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