Do governance settings moderate the effect of country risk on firms' cash holdings? Evidence from China

Seyed Alireza Athari

International Journal of Banking, Accounting and Finance, 2024, vol. 14, issue 2, 247-278

Abstract: This study examines the impact of governance settings, country risk, and their interactions on Chinese firms' cash holdings. The results reveal that companies stockpile less cash after the enhancement of governance quality by firms, provinces, and the country. Likewise, the results reveal that companies stockpile more cash by decreasing a country's vulnerability to financial, economic, and political risks. The findings also reveal that improvement in governance quality at firms, provinces, and country levels leads to Chinese firms becoming less responsive to country-specific risks in setting their cash holdings policies. Besides, the findings underscore that the impact of country risk is more prominent in companies with small sizes, low debt, and high profitability characteristics.

Keywords: governance settings; country risk; cash holdings; Chinese firms; GMM; China. (search for similar items in EconPapers)
Date: 2024
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