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Creditor Rights, Country Governance, and Corporate Cash Holdings
Author(s) -
Seifert Bruce,
Gonenc Halit
Publication year - 2016
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/jifm.12033
Subject(s) - corporate governance , endogeneity , creditor , business , cash , sample (material) , financial system , monetary economics , economics , finance , debt , chemistry , chromatography , econometrics
This study examines the impact of creditor rights and country governance on cash holdings using a sample of firms from 47 countries. We hypothesize that cash holdings are smaller when both creditor rights and country governance are high. In these circumstances firms will not need to hold as much cash for future investments needs (precautionary funds) because firms will expect that funds will be available in the future. Our findings support our hypothesis and hold for alternative definitions for cash holdings, different country samples, different definitions of governance and concerns about endogeneity.