Navigating the capital investment through national governance in BRICS economies: the role of cash holdings

Umar Farooq, Ahmad A. Al-Naimi, Muhammad Irfanullah Arfeen and Mohammad Ahmad Alnaimat

Asian Review of Accounting, 2023, vol. 32, issue 4, 606-627

Abstract: Purpose - The current analysis aims to explore the role of cash holdings in the nexus of national governance and capital investment (CIN). Design/methodology/approach - To achieve this aim, the authors sample the nonfinancial enterprises from 5 Brazil, Russia, India, China, South Africa (BRICS) economies and employ system generalized method of moments(GMM) models as an estimation technique. Findings - The empirical analysis infers that national governance has a positive relationship with CIN and a negative relationship with cash holdings. The cash holdings negatively determine CIN. However, the cash holdings show a positive relationship with CIN in the presence of the national governance index (NGI). Research limitations/implications - The important policy layout of the current analysis is that corporate managers should reduce cash holdings during better governance situations. Alternatively, corporate managers can disentangle the negative impact of bad country governance conditions on CIN by holding more cash. Originality/value - The study is innovative as it explores mediating impact of cash holdings in the NGI-CIN nexus.

Keywords: BRICS; Capital investment; Cash holdings; Country-level governance; Keynes theory of money holding; G31; G38 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arapps:ara-02-2023-0043

DOI: 10.1108/ARA-02-2023-0043

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