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Hierarchical political power and the value of cash holdings

Jia Liu, Oleksandr Talavera, Shuxing Yin and Mao Zhang
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Jia Liu: University of Portsmouth
Shuxing Yin: University of Sheffield
Mao Zhang: University of St Andrews

Discussion Papers from Department of Economics, University of Birmingham

Abstract: This study examines the relation between hierarchical political power and the value of cash holdings. To model the power structure, we utilize the hierarchical civil service system to distinguish between the holders of high- and low-level political power. We find that directors with high-level political power increase the market value of cash, whereas those with low-level political power have no impact. The effects are stronger in regions where politicians are subject to greater political pressures and in firms experiencing acute agency conflicts. The findings suggest that the multi-faceted nature of political power is of great significance to corporate wealth.

Keywords: Political power; Political capital; High- and low-ranking political directors; Board heterogeneity; Value of cash holdings (search for similar items in EconPapers)
JEL-codes: G30 G32 P16 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2022-03
New Economics Papers: this item is included in nep-cfn and nep-pol
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