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Excess Control Rights, Multiple Large Shareholders, and Corporate Cash Holding Behavior

Author

Listed:
  • Ramzi Benkraiem
  • Sabri Boubaker
  • Imen Derouiche
  • Emilios Galariotis

Abstract

This article examines the effects of excess control rights of the controlling shareholder and the presence of multiple large shareholders on the propensity of firms to save cash out of cash flow, i.e. the sensitivity of cash to cash flow. Using a data set covering 6,430 firm?year observations of 634 French listed firms, the evidence shows that firms have high cash flow sensitivity of cash when the controlling shareholder?s control rights exceed its cash-flow ownership. However, this sensitivity decreases with the contestability of the controlling owner?s power. Taken together, these findings provide empirical support to the argument that firms experiencing excess control rights save more cash out of cash flow due to their considerable financial constraints that are lowered in the presence of high control contestability.

Suggested Citation

  • Ramzi Benkraiem & Sabri Boubaker & Imen Derouiche & Emilios Galariotis, 2023. "Excess Control Rights, Multiple Large Shareholders, and Corporate Cash Holding Behavior," Finance, Presses universitaires de Grenoble, vol. 44(3), pages 47-108.
    • Handle: RePEc:cai:finpug:fina_pr_009
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    Keywords

    Excess control rights; Multiple large shareholders; Corporate cash holding behavior; Cash flow sensitivity of cash; G32; G34; M41;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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