 Distracted institutional shareholders and corporate cash holdingsAdrian (Wai-Kong) Cheung (), Mostafa Monzur Hasan and Joye Khoo International Review of Economics & Finance, 2021, vol. 71, issue C, 453-466 Abstract: We investigate whether institutional investors’ distraction affects corporate cash holdings. We also investigate two channels that may explain the relationship (if any) between institutional shareholder distraction and corporate cash holdings. First, the acquisition channel predicts that a reduction of monitoring intensity allows the firm to engage in costly and value-destroying acquisitions and this, in turn, lowers cash holdings. Second, the payout channel suggests that firms with distracted shareholders are associated with dividend cuts, and therefore, shareholder-distraction-related payout cuts may leave the firm with more cash holdings. Using 26,727 firm-year observations (3813 unique firms) over the period 1980 to 2010, we find evidence that institutional shareholder distraction is negatively associated with corporate cash holdings. We also find that this effect is driven mainly by the acquisitions channel. The evidence is robust to an alternative estimation method and alternative measures of key variables. Keywords: Distracted shareholders; Cash holdings; Acquisitions; Total payout (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:71:y:2021:i:c:p:453-466 DOI: 10.1016/j.iref.2020.08.018 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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