Does foreign ownership affect corporate cash holdings? Evidence from Amman Stock Exchange

Lara Al-Haddad and Abdullah Al-Ahmad

International Journal of Business Governance and Ethics, 2024, vol. 18, issue 3, 297-312

Abstract: This study investigates the impact of foreign ownership on corporate cash holdings of Jordanian companies listed on the Amman Stock Exchange. Using a sample of 83 Jordanian companies during the 2010 to 2019 period, our results reveal that there is a statistically significant negative relationship between foreign ownership and corporate cash holdings, suggesting favourable effects of foreign investors on the financing structure of Jordanian companies. That is, when Jordanian companies reduce their cash holdings levels, more financial resources became available to be assigned to other activities, (e.g., investments) that can contribute positively to the growth of these companies. Further, lower cash balances might restrict the managers' ability to overinvest in value-decreasing projects. Hence, foreign investors appeared to enhance the corporate governance quality by reducing the information asymmetry and agency costs associated with excessive cash balances. Our findings have significant policy implications for policymakers, regulators, academics, current and future investors.

Keywords: Amman Stock Exchange; ASE; cash holdings; foreign ownership; Jordan. (search for similar items in EconPapers)
Date: 2024
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