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Local corruption and SME cash holdings in an emerging market

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  • Tran, Quoc Trung

Abstract

This paper examines how local corruption influences cash holdings of small and medium sized enterprises (SMEs). We argue that SMEs have little agency problem and weak bargaining power with corrupt officials; therefore, they are more likely to shield cash from rent-seeking. With a sample of 361,000 SMEs over the period 2013–2019, we find that local corruption reduces SME cash reserves. This negative relationship is stronger when firm size is smaller. Moreover, we find that local corruption also drives firms to accumulate less cash from their cash flows.

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  • Tran, Quoc Trung, 2025. "Local corruption and SME cash holdings in an emerging market," International Review of Economics & Finance, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025006732
    DOI: 10.1016/j.iref.2025.104510
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    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

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