The Effects of Political Connections on the Level and Value of Cash Holdings: International Evidence
Publication Type
Working Paper
Publication Date
1-2012
Abstract
In this paper, we examine the role of political connections on corporate liquidity policies and their consequences in an international setting. We find that managers of politically connected firms have a tendency to hoard more cash than their non-connected counterparts. Moreover, presence of political connections reduces the value of cash holdings. Further analysis reveals that our main findings are more pronounced for firms in emerging markets as well as for firms in countries with weak legal protection of investors and high levels of corruption. Overall, our empirical results corroborate previous findings on the agency cost explanation for corporate cash holdings.
Keywords
Political connections, Cash holding, Legal protection, Corruption
Discipline
Accounting | Business Law, Public Responsibility, and Ethics
Research Areas
Corporate Governance, Auditing and Risk Management
First Page
1
Last Page
44
Citation
Kusnadi, Yuanto and Wei, K.C. John.
The Effects of Political Connections on the Level and Value of Cash Holdings: International Evidence. (2012). 1-44.
Available at: https://ink.library.smu.edu.sg/soa_research/1133
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.