Does employees' interest matter more than shareholders’ interest in determining cash management policy?

Kartick Gupta and Chandra Krishnamurti

International Review of Economics & Finance, 2023, vol. 84, issue C, 568-589

Abstract: Extant literature suggests that firms that follow good corporate governance (CG) practices maintain lower cash holdings. Another strand of literature suggests that employee-friendly firms maintain higher cash holdings. The negative relationship between CG practices and cash holding, and the positive relationship between employee-friendly practices and cash holding raises question as to whether firms should undertake shareholder or stakeholder-friendly policies. Our study finds that the cash holdings are negatively related to employee-friendly practices. We also find that good CG practices are negatively related to cash holdings. Cross-country evidence suggests that employee-friendly firms affect cash holdings primarily when countries follow strong labour laws and regulations, suggesting that benefits provided at the country-level complement the benefits provided by the firm.

Keywords: Employee welfare; Corporate governance; Cash holding; Country-level attributes (search for similar items in EconPapers)
JEL-codes: G32 J24 J28 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:84:y:2023:i:c:p:568-589

DOI: 10.1016/j.iref.2022.11.020

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