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International Evidence on Cash Holdings and Expected Managerial Agency Problems

Posted: 17 Nov 2006  

Ivalina Kalcheva

University of California, Riverside

Karl V. Lins

University of Utah - Department of Finance

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Abstract

This paper uses managerial control rights data for over 5000 firms from 31 countries to examine the net costs and benefits of cash holdings. We find that when external country-level shareholder protection is weak, firm values are lower when controlling managers hold more cash. Further, when external shareholder protection is weak we find that firm values are higher when controlling managers pay dividends. Only when external shareholder protection is strong do we find that cash held by controlling managers is unrelated to firm value, consistent with generally prevailing U.S. and international evidence.

Keywords: cash holdings, agency problems, corporate governance

JEL Classification: G32, G34, G35

Suggested Citation

Kalcheva, Ivalina and Lins, Karl V., International Evidence on Cash Holdings and Expected Managerial Agency Problems. Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=945422

Ivalina Kalcheva

University of California, Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States

Karl Lins (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-3171 (Phone)
801-581-7214 (Fax)

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