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CEO Political Ideology and Corporate Cash Holdings

In: Proceedings of the 13th International Conference on Business, Accounting, Finance and Economics (BAFE 2025)

Author

Listed:
  • Shirina Lin

    (The University of Queensland)

  • Dewan Rahman

    (The University of Queensland)

  • Barry Oliver

    (The University of Queensland)

Abstract

This study investigates the impact of CEO personal political ideology on the level of corporate cash holdings and the market value of the cash saved. Using individual CEO contribution data to US political parties covering the period 2003 to 2019, we find that CEO political ideology has a significant impact on firm corporate cash policy. Republican-leaning CEOs hold lower levels of cash in comparison to Democratic-leaning CEOs. This effect is more pronounced when the firms led by Republican-leaning CEOs have higher credit ratings. We also find that despite holding lower levels of cash, Republican-leaning CEOs’ conservative investment policies are valuable to shareholders. With every additional dollar of cash held, the value of cash for firms with Republican-leaning CEOs is $0.851 higher relative to Democratic-leaning CEOs. The effect is more pronounced when the firms are classified as efficient. These results suggest that Republican-leaning CEOs consider the level of cash in accordance with the trade-off theory; as the benefits of holding excess cash to mitigate costly external financing are outranked by the cost of piling unnecessary cash, leading to holding less cash. Moreover, their conservative investment policies are valuable to the market.

Suggested Citation

  • Shirina Lin & Dewan Rahman & Barry Oliver, 2025. "CEO Political Ideology and Corporate Cash Holdings," Advances in Economics, Business and Management Research, in: Thurai Murugan Nathan & Abdelhak Senadjki & Hemaniswarri Dewi Dewadas & Siti Nur Amira Othman & Ravi (ed.), Proceedings of the 13th International Conference on Business, Accounting, Finance and Economics (BAFE 2025), pages 381-409, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-968-1_27
    DOI: 10.2991/978-94-6463-968-1_27
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    Cited by:

    1. Isabel‐María García‐Sánchez & Davi Jônatas Cunha Araujo & Saudi‐Yulieth Enciso‐Alfaro, 2025. "What Do We Need to Know About the CEO's Personality Traits? A Review on the Influence on Strategic and Sustainability Decisions," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(3), pages 4081-4134, May.

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