Transient Institutional Ownership, Costly External Finance, and Corporate Cash Holdings

Journal of Business Finance & Accounting, 0[10.1111/jbfa.12840]

54 Pages Posted: 12 Feb 2020 Last revised: 26 Feb 2025

See all articles by Hyun Joong Im

Hyun Joong Im

The University of Seoul

Heungju Park

Sungkyunkwan University - SKK Business School

Shams Pathan

University of Newcastle - Newcastle University Business School

Robert W. Faff

Corvinus University Budapest; University of Queensland; Bond University

Date Written: June 10, 2024

Abstract

We investigate and robustly show that transient institutional ownership has a positive effect on the level and value of corporate cash holdings. Further, using a regression discontinuity design exploiting the Russell 1000/2000 index reconstitution as an exogenous shock to transient institutional ownership, we show that the effects are causal. Additionally, our analysis shows that transient institutions exacerbate debtholder-shareholder conflicts, thereby increasing the cost of debt. Overall, our results suggest that transient institutions make cash holdings more valuable because financing by debt becomes more costly.

Keywords: transient institutional ownership, cash holdings, debtholder-shareholder conflicts, stock price crash risk

JEL Classification: G23, G31, G32, G34

Suggested Citation

Im, Hyun Joong and Park, Heungju and Pathan, Shams and Faff, Robert W., Transient Institutional Ownership, Costly External Finance, and Corporate Cash Holdings (June 10, 2024). Journal of Business Finance & Accounting, 0[10.1111/jbfa.12840], Available at SSRN: https://ssrn.com/abstract=3514174 or http://dx.doi.org/10.1111/jbfa.12840

Hyun Joong Im (Contact Author)

The University of Seoul ( email )

163 Seoulsiripdae-ro
Dongdaemun-gu
Seoul, 02504
Korea, Republic of (South Korea)
+82-2-6490-2268 (Phone)
+82-2-6490-2219 (Fax)

Heungju Park

Sungkyunkwan University - SKK Business School ( email )

Seoul
Korea, Republic of (South Korea)

Shams Pathan

University of Newcastle - Newcastle University Business School ( email )

5 Barrack Road
Frederic Douglass Centre
NEWCASTLE UPON TYNE, NE4 5TG
United Kingdom

Robert W. Faff

Corvinus University Budapest ( email )

Fovam ter 8.
Budapest
Hungary

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Bond University ( email )

Gold Coast, QLD 4229
Australia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
200
Abstract Views
1,841
Rank
324,229
PlumX Metrics