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Agency Problem or Trade-off Hypothesis: The Implication of Corporation Cash Holding——Test Based on Crash Risk

In: Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022)

Author

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  • Shujun Sheng

    (Shanghai Normal University Tianhua Collegeg, School of Business)

Abstract

Based on the data of Shanghai-Shenzhen A-share listed companies in China from 2007 to 2019, the relationship between cash holding level and the risk of stock price collapse was verified. The study found that the increase in cash holdings of enterprises, increased management opportunistic behavior, leading to management can make higher on-the-job consumption and seek more compensation, when they implement these behaviors, they are bound to try to conceal; Over time, these actions are eventually discovered by the market and trigger a stock price crash, which manifests itself in cash holdings in capital markets as increasing the risk of a share price collapse; Further analysis found that effective internal and external governance can constrain management's opportunistic behavior.

Suggested Citation

  • Shujun Sheng, 2022. "Agency Problem or Trade-off Hypothesis: The Implication of Corporation Cash Holding——Test Based on Crash Risk," Advances in Economics, Business and Management Research, in: Yushi Jiang & Yuriy Shvets & Hrushikesh Mallick (ed.), Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022), pages 1703-1711, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-036-7_255
    DOI: 10.2991/978-94-6463-036-7_255
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