Journal article
Cash holding adjustments and managerial entrenchment
Journal of corporate finance (Amsterdam, Netherlands), Vol.36, pp.190-205
02/01/2016
DOI: 10.1016/j.jcorpfin.2015.12.008
Abstract
We find that, on average, firms close 31% of their gap between target and actual cash ratio each year. The adjustment speed is generally swifter if the actual cash ratio exceeds the target ratio, possibly because it is cheaper to disgorge cash than it is to raise it. But as firms become more insulated from the threat of takeovers, they decelerate their cash adjustment at high cash ratios. This evidence suggests that self-interested managers are reluctant to disburse excess cash, and they will allow cash levels to remain high unless the firms are subject to external pressure.
•Firms close 31% of their gap between target and actual cash ratio each year.•The adjustment speed is swifter if the actual cash ratio exceeds the target ratio.•Managerial entrenchment decelerates adjustment at high cash ratios.
Details
- Title: Subtitle
- Cash holding adjustments and managerial entrenchment
- Creators
- Zhan Jiang - Shanghai Jiao Tong UniversityErik Lie - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Journal of corporate finance (Amsterdam, Netherlands), Vol.36, pp.190-205
- Publisher
- Elsevier B.V
- DOI
- 10.1016/j.jcorpfin.2015.12.008
- ISSN
- 0929-1199
- eISSN
- 1872-6313
- Language
- English
- Date published
- 02/01/2016
- Academic Unit
- Finance
- Record Identifier
- 9984380406702771
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