International Evidence on Cash Holdings and Expected Managerial Agency Problems

International Evidence on Cash Holdings and Expected Managerial Agency Problems

Ivalina Kalcheva, Karl Lins

Series number :

Serial Number: 
042/2004

Date posted :

July 01 2004

Last revised :

SSRN Share

Keywords

  • cash holdings • 
  • agency problems • 
  • Corporate governance

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.

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Authors

Real name:
Ivalina Kalcheva
Professor
Real name:
Karl Lins
University of Utah