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CFOs in the shadows: Co-option and the shaping of China’s corporate cash holdings

Author

Listed:
  • Liu, Wenqiong
  • Yeh, Chih-Chuan
  • Li, Ziqi
  • Huang, Ho-Chuan

Abstract

This study investigates the relationship between CFO co-option and corporate cash holdings in China from 2000 to 2022, revealing that CFOs appointed after CEOs tend to maintain higher cash reserves, possibly due to compromised decision-making independence. The effect is more pronounced in firms with higher risks, fewer financial constraints, less market competition, and smaller size, and is largely mediated by the impact of co-opted CFOs on worsening accounting quality, highlighting the complex dynamics between executive roles and financial decision-making in corporate governance.

Suggested Citation

  • Liu, Wenqiong & Yeh, Chih-Chuan & Li, Ziqi & Huang, Ho-Chuan, 2024. "CFOs in the shadows: Co-option and the shaping of China’s corporate cash holdings," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009802
    DOI: 10.1016/j.frl.2024.105950
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    More about this item

    Keywords

    Cash holdings; CEO; CFO; Co-option;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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