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Political connections and the value of cash holdings

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  • Kusnadi, Yuanto

Abstract

This study examines how political connections influence the value of cash holdings in an international setting. The main finding reveals that political connections are not associated with the value of cash holdings in the overall sample. However, further analysis demonstrates that political connections are negatively associated with the value of cash holdings for firms in emerging markets and in countries with high levels of corruption. Moreover, the negative valuation of cash holdings is driven by firms that are connected through large shareholders. Overall, the findings provide new insights into the value relevance of cash holdings, especially for politically connected firms.

Suggested Citation

  • Kusnadi, Yuanto, 2019. "Political connections and the value of cash holdings," Finance Research Letters, Elsevier, vol. 30(C), pages 96-102.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:96-102
    DOI: 10.1016/j.frl.2019.03.035
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    Keywords

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    JEL classification:

    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • F54 - International Economics - - International Relations, National Security, and International Political Economy - - - Colonialism; Imperialism; Postcolonialism
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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