Corporate Cash Holding, Agency Problems and Economic Policy Uncertainty

59 Pages Posted: 30 Jan 2020 Last revised: 29 Jul 2021

See all articles by Saud Al-Thaqeb

Saud Al-Thaqeb

Kuwait University

Siamak Javadi

University of Texas - Rio Grande Valley

Mohsen Mollagholamali

Western Kentucky University

Ali Nejadmalayeri

University of Wyoming - College of Business

Date Written: February 7, 2015

Abstract

Consistent with the agency view of cash holdings, we document a strong negative relationship between economic policy uncertainty and corporate cash holdings for non-U.S. firms from 19 countries. Our results are robust to different measures of cash holdings and model specifications and survive after addressing endogeneity. We provide evidence that the decrease in cash holdings is moderated by shareholders’ ability to force managers to disgorge cash that fits consistently within the agency framework. Overall, results suggest that lowering cash holdings help alleviate agency problems in the presence of policy uncertainty and underscore the significance of country attributes in corporate finance.

Keywords: Policy uncertainty, Corporate Cash holding, Agency problems

JEL Classification: G15, G32, G35, G38

Suggested Citation

Al-Thaqeb, Saud and Javadi, Siamak and Mollagholamali, Mohsen and Nejadmalayeri, Ali, Corporate Cash Holding, Agency Problems and Economic Policy Uncertainty (February 7, 2015). International Review of Financial Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3515025 or http://dx.doi.org/10.2139/ssrn.3515025

Saud Al-Thaqeb

Kuwait University ( email )

Safat, 13060
Kuwait

Siamak Javadi (Contact Author)

University of Texas - Rio Grande Valley ( email )

1201 W. University Dr.
Edinburg, TX 78539
United States

Mohsen Mollagholamali

Western Kentucky University ( email )

Bowling Green, KY 42101
United States

Ali Nejadmalayeri

University of Wyoming - College of Business ( email )

1000 E. University Avenue
Laramie, WY 82071
United States

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