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Hierarchical political power and the value of cash holdings

Author

Listed:
  • Jia Liu

    (University of Portsmouth)

  • Oleksandr Talavera

    (University of Birmingham)

  • Shuxing Yin

    (University of Sheffield)

  • Mao Zhang

    (University of St Andrews)

Abstract

This study examines the relation between hierarchical political power and the value of cash holdings. To model the power structure, we utilize the hierarchical civil service system to distinguish between the holders of high- and low-level political power. We find that directors with high-level political power increase the market value of cash, whereas those with low-level political power have no impact. The effects are stronger in regions where politicians are subject to greater political pressures and in firms experiencing acute agency conflicts. The findings suggest that the multi-faceted nature of political power is of great significance to corporate wealth.

Suggested Citation

  • Jia Liu & Oleksandr Talavera & Shuxing Yin & Mao Zhang, 2022. "Hierarchical political power and the value of cash holdings," Discussion Papers 22-03, Department of Economics, University of Birmingham.
    • Handle: RePEc:bir:birmec:22-03
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    1. Xiaohui Chen & Wen Chen & Tao Hu & Bo Yang & Jianguang Zeng, 2023. "Regional carbon efficiency and corporate cash holdings: evidence from China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.

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    More about this item

    Keywords

    Political power; Political capital; High- and low-ranking political directors; Board heterogeneity; Value of cash holdings;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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