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Article: The effect of government quality on corporate cash holdings
Title | The effect of government quality on corporate cash holdings |
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Authors | |
Keywords | Cash holding China Government quality Property rights Twin agency problems |
Issue Date | 2014 |
Publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jcorpfin |
Citation | Journal of Corporate Finance, 2014, v. 27, p. 384-400 How to Cite? |
Abstract | We use China as a laboratory to test the effect of government quality on cash holdings. We build on, and extend, the existing literature on government expropriation and its interaction with firm-level agency problems by proposing a financial constraint mitigation argument. We find that firms hold less cash when local government quality is high, which is not consistent with the state expropriation argument, but supports the financial constraint mitigation argument. A good government lowers the investment sensitivity to cash flows and cash sensitivity to cash flows, decreases cash holdings more significantly in private firms, and improves access to bank and trade credit financing. We also test and find support for Stulz's (2005) model on the interaction between government and firm agency problems. © 2014 Elsevier B.V. |
Persistent Identifier | http://hdl.handle.net/10722/201016 |
ISSN | 2023 Impact Factor: 7.2 2023 SCImago Journal Rankings: 3.182 |
SSRN | |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Chen, D | en_US |
dc.contributor.author | Li, S | en_US |
dc.contributor.author | Xiao, J | en_US |
dc.contributor.author | Zou, H | en_US |
dc.date.accessioned | 2014-08-21T07:09:56Z | - |
dc.date.available | 2014-08-21T07:09:56Z | - |
dc.date.issued | 2014 | en_US |
dc.identifier.citation | Journal of Corporate Finance, 2014, v. 27, p. 384-400 | en_US |
dc.identifier.issn | 0929-1199 | - |
dc.identifier.uri | http://hdl.handle.net/10722/201016 | - |
dc.description.abstract | We use China as a laboratory to test the effect of government quality on cash holdings. We build on, and extend, the existing literature on government expropriation and its interaction with firm-level agency problems by proposing a financial constraint mitigation argument. We find that firms hold less cash when local government quality is high, which is not consistent with the state expropriation argument, but supports the financial constraint mitigation argument. A good government lowers the investment sensitivity to cash flows and cash sensitivity to cash flows, decreases cash holdings more significantly in private firms, and improves access to bank and trade credit financing. We also test and find support for Stulz's (2005) model on the interaction between government and firm agency problems. © 2014 Elsevier B.V. | - |
dc.language | eng | en_US |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jcorpfin | en_US |
dc.relation.ispartof | Journal of Corporate Finance | en_US |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.rights | NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Corporate Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in PUBLICATION, [VOL 27, (2014)] DOI 10.1016/j.jcorpfin.2014.05.008 | - |
dc.subject | Cash holding | - |
dc.subject | China | - |
dc.subject | Government quality | - |
dc.subject | Property rights | - |
dc.subject | Twin agency problems | - |
dc.title | The effect of government quality on corporate cash holdings | en_US |
dc.type | Article | en_US |
dc.identifier.email | Zou, H: hongzou@hku.hk | en_US |
dc.identifier.authority | Zou, H=rp01800 | en_US |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1016/j.jcorpfin.2014.05.008 | en_US |
dc.identifier.scopus | eid_2-s2.0-84904102835 | - |
dc.identifier.hkuros | 232944 | en_US |
dc.identifier.volume | 27 | en_US |
dc.identifier.spage | 384 | en_US |
dc.identifier.epage | 400 | en_US |
dc.identifier.isi | WOS:000341547300021 | - |
dc.publisher.place | Netherlands | - |
dc.identifier.ssrn | 1969711 | - |
dc.customcontrol.immutable | sml 141015 | - |
dc.identifier.issnl | 0929-1199 | - |