Publication Type
Journal Article
Version
submittedVersion
Publication Date
11-2024
Abstract
This paper examines the role of political connections on the cash flow sensitivity of cash using a sample of international firms. The finding reveals that the cash flow sensitivity of cash is lower for politically connected firms than their non-connected counterparts, which is supportive of the precautionary motive of cash holdings. Further analyses reveal that the result is driven by political connections that are made through the directors of the firms and with members of parliament, as well as by differences in country-level institutional infrastructure. Overall, the empirical results corroborate that of previous studies on the relevance of the precautionary motive of cash holdings.
Keywords
Political connections, Cash flow sensitivity of cash, Precautionary motive of cash holdings, Financial constraints, Country-level institutional infrastructure
Discipline
Accounting | Corporate Finance
Research Areas
Corporate Governance, Auditing and Risk Management
Publication
Finance Research Letters
Volume
69
First Page
1
Last Page
8
ISSN
1544-6123
Identifier
10.1016/j.frl.2024.106193
Publisher
Elsevier
Citation
KUSNADI, Yuanto.
Politically connected firms and the cash flow sensitivity of cash: International evidence. (2024). Finance Research Letters. 69, 1-8.
Available at: https://ink.library.smu.edu.sg/soa_research/2051
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.frl.2024.106193