The improvement of legal system, entrepreneur immigration, and corporate cash holdings

Tingting Duan, Xue Yang and Zhe Zhang

International Review of Financial Analysis, 2023, vol. 89, issue C

Abstract: This study investigates the relationship between controlling persons' foreign residency rights and the cash holdings of non-state-owned listed firms in China from 2005 to 2018. Our findings indicate that the immigration status of entrepreneurs affects the amount of cash held by their firms, as it reduces legal costs in a weak legal system. This result remains robust under propensity score matching, instrumental variable method, and Heckman two-stage regression. What is more, the improvement of the legal system moderates the impact of entrepreneur immigration on corporate cash holdings, deters their short-sighted tunneling, and motivates them to put more effort into long-term innovation. This study enhances our understanding of the behavioral patterns of immigrant entrepreneurs and contributes to the literature on corporate cash holdings and upper echelons by highlighting the role of the legal system in improving their behavior in emerging markets.

Keywords: Entrepreneur immigration; The improvement of legal system; Corporate cash holdings; Agency cost; Government intervention (search for similar items in EconPapers)
JEL-codes: G30 G32 K4 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:89:y:2023:i:c:s1057521923002922

DOI: 10.1016/j.irfa.2023.102776

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