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The effects of country and firm-level governance on cash management

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  • Seifert, Bruce
  • Gonenc, Halit

Abstract

We examine the effects of both country and firm-level governance on cash holdings and the value of cash for a large international sample during the period 2002–2013. We find that both strong country and strong firm-level governance reduce the amount of cash holdings. We observe that a number of the components of both firm and country-level governance are significantly related to the decrease in cash holdings. We show that the value of cash increases as a result of good country-level governance and we provide mixed evidence that good firm-level governance also increases the value of cash. Our analysis also confirms that the payment of dividends adds to the value of cash.

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  • Seifert, Bruce & Gonenc, Halit, 2018. "The effects of country and firm-level governance on cash management," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 52(C), pages 1-16.
    • Handle: RePEc:eee:intfin:v:52:y:2018:i:c:p:1-16
    DOI: 10.1016/j.intfin.2017.12.001
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    More about this item

    Keywords

    Cash holdings; Value of cash; Corporate governance; Country governance; Dividend policy; Firm value;
    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
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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