Investor protection, managerial entrenchment, and cash holdings: Cross‐country evidence

Henrique Castro Martins

International Finance, 2019, vol. 22, issue 3, 422-438

Abstract: We investigate whether investor protection (i.e. shareholder protection and creditor rights) is associated with how entrenched managers set corporate cash holdings. Our sample covers more than 6,000 firms from 29 countries (roughly 16,000 observations during 2010–2013). We find that the entrenchment–cash holdings association is sensitive to the level of shareholder protection but not to the level of creditor rights. Moreover, we find that the way shareholder protection shapes this association depends upon how managers become entrenched. When managers become entrenched through ownership, shareholders consent to their preferences to hold more cash, whereas, when managers become entrenched through CEO duality, shareholders force them to disgorge cash. We interpret our findings as evidence that shareholders agree to increase cash when managers are aligned with them by ownership but prefer to decrease cash when they are not aligned, whereas creditors do not influence entrenched managers’ cash holdings decisions.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/infi.12343

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:intfin:v:22:y:2019:i:3:p:422-438

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1367-0271

Access Statistics for this article

International Finance is currently edited by Benn Steil

More articles in International Finance from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().