Corporate Cash Holding, Twin Agency Problems and Policy Uncertainty

74 Pages Posted: 30 Jan 2020 Last revised: 24 Apr 2020

See all articles by Mohsen Mollagholamali

Mohsen Mollagholamali

Western Kentucky University

Siamak Javadi

University of Texas - Rio Grande Valley

Saud Al-Thaqeb

Kuwait University

Date Written: February 7, 2015

Abstract

We document a strong negative relationship between policy uncertainty and corporate cash holdings for non-U.S. firms from 19 countries. Consistent with the twin agency problems framework of Stulz (2005), firms reduce their cash holdings by increasing their dividend payments to minimize the loss from potential state expropriation when facing policy uncertainty. The economic link between policy uncertainty, reduction in cash holdings, and increase in dividend payouts is stronger for firms in countries in which state expropriation is more likely or minority shareholder protection is lower. Overall, results highlight the significance of twin agency problems and country attributes in corporate finance.

Suggested Citation

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

Mohsen Mollagholamali (Contact Author)

Western Kentucky University ( email )

Bowling Green, KY 42101
United States

Siamak Javadi

University of Texas - Rio Grande Valley ( email )

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

Saud Al-Thaqeb

Kuwait University ( email )

Safat, 13060
Kuwait

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