 Institutional development, state ownership, and corporate cash holdings: Evidence from ChinaYuanto Kusnadi, Zhifeng Yang and Yuxiao Zhou Journal of Business Research, 2015, vol. 68, issue 2, 351-359 Abstract: This study examines how institutional development and state ownership influence corporate cash holdings among Chinese firms. The empirical results reveal that firms in provinces with more developed institutions (non-state-controlled firms) hold more (less) cash reserves than those in provinces with less developed institutions (state-controlled firms). Moreover, the positive effect between institutional development and cash holdings is more prominent for non-state-controlled firms. These findings are consistent with the hypothesis that more developed institutions mitigate the threat of political extraction for non-state-controlled firms, resulting in larger cash holdings among these firms. Subsequent analyses demonstrate that the impact of institutional development on cash holdings is weakened for non-state-controlled firms which have established political connections. Therefore, this study identifies one vital channel through which political connections are beneficial for non-state-controlled firms in terms of mitigating the threat of political extraction. Keywords: Institutional development; State ownership; Political connections; Cash holdings (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:jbrese:v:68:y:2015:i:2:p:351-359 DOI: 10.1016/j.jbusres.2014.06.023 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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