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Creditor rights and corporate cash holdings: International evidence

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  • Yung, Kenneth
  • Nafar, Nadia A.

Abstract

In this cross-country analysis, we find evidence of a positive relation between creditor rights and the level of corporate cash holdings. In addition, we find that the excess cash motivated by creditor rights has a significant negative impact on firm value. These relationships, however, are mitigated in countries that have stronger investor protection. The results are consistent with the interpretation that investors have concerns regarding the motives of holding cash when creditor rights are strong.

Suggested Citation

  • Yung, Kenneth & Nafar, Nadia A., 2014. "Creditor rights and corporate cash holdings: International evidence," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 111-127.
    • Handle: RePEc:eee:reveco:v:33:y:2014:i:c:p:111-127
    DOI: 10.1016/j.iref.2014.03.011
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    More about this item

    Keywords

    Creditor rights; Cash holdings; Liquidity; Firm value; Investor protection;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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