Organization Capital and Corporate Cash Holdings

49 Pages Posted: 15 Feb 2020

See all articles by Alex Marwick

Alex Marwick

Curtin University

Mostafa Monzur Hasan

Macquarie University

Tianpei Luo

Curtin University - Department of Finance and Banking

Date Written: January 21, 2020

Abstract

This paper investigates the relationship between organization capital and corporate cash holdings. We develop two competing hypotheses in relating organization capital with cash holding. Our analysis reveals that organization capital is related to high levels of cash holdings. Moreover, we find that the effect of organization capital on corporate cash holdings is stronger for firms experiencing high levels of financing constraint and cash flow risk. Our results remain robust to alternative measures of organization capital and corporate cash holdings, and are not driven by omitted variable bias or endogeneity issues. We also find that the positive relation between organization capital and cash holdings is not confounded by sample period or industry group. Overall, we provide robust evidence that supports the precautionary motive for corporate cash holding.

Keywords: Organization capital; cash holdings

JEL Classification: E22; G30; G32.

Suggested Citation

Marwick, Alex and Hasan, Mostafa Monzur and Luo, Tianpei, Organization Capital and Corporate Cash Holdings (January 21, 2020). International Review of Financial Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3523061

Alex Marwick

Curtin University ( email )

Kent Street
Bentley
Perth, WA WA 6102
Australia

Mostafa Monzur Hasan (Contact Author)

Macquarie University ( email )

Level 3, Building 4ER,
Sydney, NSW 2109
Australia

HOME PAGE: http://https://researchers.mq.edu.au/en/persons/mostafa-hasan

Tianpei Luo

Curtin University - Department of Finance and Banking ( email )

Bentley 6102 WA
Australia

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