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The determinants of cash flow sensitivity of cash: The family ownership effect

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  • Lozano, M. Belén
  • Yaman, Serhat

Abstract

This paper investigates firms’ cash flow sensitivity of cash (CFSC) in a European setting. We examine the differing effects of financial constraints and income and substitution effects on CFSC in the context of the family ownership structure. When examining the shareholders’ behavior within the ownership structure of family firms, we find a positive CFSC level for our full sample. Our results show a significant connection between the family ownership structure and CFSC’s determinant factors: the higher (lower) sensitivity for the firms with more (less) financial constraints suggests that family firms are financially less constrained than non-family firms. Additionally, contrary to prior literature, we find income and substitution effects have a nonnegative effect on CFCS. We explain this finding from a productivity shocks perspective related to the financial crisis, which occurs during our analysis period.

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  • Lozano, M. Belén & Yaman, Serhat, 2020. "The determinants of cash flow sensitivity of cash: The family ownership effect," Research in International Business and Finance, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:riibaf:v:53:y:2020:i:c:s0275531919304386
    DOI: 10.1016/j.ribaf.2020.101204
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    More about this item

    Keywords

    Cash holding; Sensitivity; Ownership structure; Agency costs; Productivity shocks;
    All these keywords.

    JEL classification:

    • 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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