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The impact of political connections and business groups on cash holdings: Evidence from Chinese listed firms

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  • Lin, Tsui-Jung
  • Chang, Hai-Yen
  • Yu, Hui-Fun
  • Kao, Ching-Pao

Abstract

We investigated the impact of political connections and business group affiliation on the cash holdings of firms listed on two main Chinese stock exchanges. We applied panel data regression analysis on a dataset comprising 10,832 observations for these companies from 2008 to 2015. We found political connections to be positively correlated with cash holdings, while business group affiliation is negatively correlated. Firms with both political connections and business group affiliations hold more cash. These findings are consistent with the tenets of agency theory and the speculative motives of corporate managers.

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  • Lin, Tsui-Jung & Chang, Hai-Yen & Yu, Hui-Fun & Kao, Ching-Pao, 2019. "The impact of political connections and business groups on cash holdings: Evidence from Chinese listed firms," Global Finance Journal, Elsevier, vol. 40(C), pages 65-73.
    • Handle: RePEc:eee:glofin:v:40:y:2019:i:c:p:65-73
    DOI: 10.1016/j.gfj.2018.10.001
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    Cited by:

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    More about this item

    Keywords

    Political connections; Cash holdings; Business groups;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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