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Principal-principal conflicts and corporate cash holdings: Evidence from China

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  • Jebran, Khalil
  • Chen, Shihua
  • Tauni, Muhammad Zubair

Abstract

The study investigates the effect of principal-principal (PP) conflicts on corporate cash holdings. By examining a sample of Chinese listed firms over the period 2003–2016, we observe that PP conflicts are positively associated with cash holdings. Furthermore, we observe that institutional ownership attenuates the positive association between PP conflicts and cash holdings. Additional analysis reveals that the positive effect of PP conflicts on cash holdings is more pronounced for firms with high cash holdings than for those with low cash holdings. Overall, the results support the argument that controlling shareholders expropriate minority shareholders by holding larger cash reserves.

Suggested Citation

  • Jebran, Khalil & Chen, Shihua & Tauni, Muhammad Zubair, 2019. "Principal-principal conflicts and corporate cash holdings: Evidence from China," Research in International Business and Finance, Elsevier, vol. 49(C), pages 55-70.
    • Handle: RePEc:eee:riibaf:v:49:y:2019:i:c:p:55-70
    DOI: 10.1016/j.ribaf.2019.02.010
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    Cited by:

    1. Khalil Jebran & Shihua Chen & Muhammad Zubair Tauni & Hassan Ahmad, 2019. "Corporate Governance, Ultimate Owner, and Target Cash Holdings: Evidence From China," SAGE Open, , vol. 9(4), pages 21582440198, December.
    2. Chen, Shihua & Han, Xu & Jebran, Khalil, 2020. "Social trust environment and tunneling," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(3).
    3. Muhammad Arif Khan & Xuezhi Qin & Khalil Jebran & Abdul Rashid, 2020. "The Sensitivity of Firms’ Investment to Uncertainty and Cash Flow: Evidence From Listed State-Owned Enterprises and Non-State-Owned Enterprises in China," SAGE Open, , vol. 10(1), pages 21582440209, January.
    4. Fai Lim Loi & Jean Jinghan Chen & Zhuo Qiao, 2023. "CEO cultural background and corporate cash holdings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1069-1100, April.
    5. Gupta, C.P. & Bedi, Prateek, 2020. "Corporate cash holdings and promoter ownership," Emerging Markets Review, Elsevier, vol. 44(C).
    6. Tran, Quoc Trung, 2020. "Financial crisis, shareholder protection and cash holdings," Research in International Business and Finance, Elsevier, vol. 52(C).
    7. Thi Tuyet Dao, Nhung & Guney, Yilmaz & Hudson, Robert, 2023. "Managerial overconfidence and corporate cash holdings: Evidence from primary and secondary data," Research in International Business and Finance, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Principal-principal conflicts; Cash holdings; Institutional ownership; China;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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