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Governance, product market competition and cash management in IPO firms

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  • Jain, Bharat A.
  • Li, Joanne
  • Shao, Yingying
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    Abstract

    This study evaluates the link between CEO governance heterogeneity, power structure of the firm, and product market competition on various facets of post-IPO cash policy. Our results suggest that post-IPO cash holdings as well as marginal value of cash reserves are higher under a founder CEO governance regime relative to non-founder CEOs. Concentrating board power in the hands of founder CEOs however, reduces their ability to maintain higher post-IPO cash reserves. Our results also suggest that product market competition influences both the level and marginal value of cash reserves in the hands of founder CEOs. Further, we find that stronger internal governance reduces the tendency of IPO firms to deploy excess cash reserves to fund internal investments in excess of industry rivals. Finally, our results suggest that excess cash reserves in competitive industry environments lead to superior post-IPO operating performance.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 37 (2013)
    Issue (Month): 6 ()
    Pages: 2052-2068

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    Handle: RePEc:eee:jbfina:v:37:y:2013:i:6:p:2052-2068

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Cash management; Product market competition; IPOs; Governance; Power structure of the firm;

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    References

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