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Article
Publication date: 21 March 2023

Abdulaziz Ahmed Alomran

This study aims to investigate the impact of ownership by large shareholders (blockholders) on corporate cash holdings. The study further investigates heterogeneity in the…

524

Abstract

Purpose

This study aims to investigate the impact of ownership by large shareholders (blockholders) on corporate cash holdings. The study further investigates heterogeneity in the relationship between blockholder ownership and corporate cash holdings.

Design/methodology/approach

Building on the precautionary and agency motives of corporate cash holdings, the study focuses on publicly listed firms from 22 European countries for the period from 2006 to 2015. Multiple pooled ordinary least square and fixed effects regression models are employed to examine the relationship between blockholder ownership and firms’ cash holdings.

Findings

This study documents a positive relationship between blockholder ownership and corporate cash holdings which indicates the role of blockholders in influencing firms’ cash holdings policies. However, further analyses show that the effect of blockholding on cash holdings depends on the type of blockholder. While the relationship is still positive between cash holdings and ownership by strategic blockholders, it turns negative for the ownership by institutional blockholders.

Research limitations/implications

This study provides evidence for the important role played by firms’ ownership structures, and especially blockholding, in shaping firms’ cash holdings decisions. The findings are therefore of great value for investors, firms’ management and board and policy makers.

Originality/value

This paper contributes to the literature by providing an explanation of the contradictory results documented in the literature on the impact of blockholders on corporate cash holdings. This study, to the best of the author’s knowledge, is the first to examine the effect of blockholder ownership on cash holdings by distinguishing between different types of blockholder.

Details

International Journal of Managerial Finance, vol. 20 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

Available. Open Access. Open Access
Article
Publication date: 31 January 2023

Moncef Guizani, Dorra Talbi and Gaafar Abdalkrim

This study aims to investigate the influence of economic policy uncertainty (EPU) and geopolitical risk (GPR) on corporate cash holding level and speed of adjustment (SOA) in one…

2009

Abstract

Purpose

This study aims to investigate the influence of economic policy uncertainty (EPU) and geopolitical risk (GPR) on corporate cash holding level and speed of adjustment (SOA) in one of the most important emerging markets in the Middle East and North Africa, Saudi Arabia. It also investigates whether Shariah-compliance as well as financial constraints affect the relationship between both EPU and GPR and corporate cash holdings.

Design/methodology/approach

The study employs GMM regression considering a sample of 140 nonfinancial firms drawn from the Saudi stock market over the period 2002 to 2019.

Findings

The authors find evidence in support of the precautionary motive hypothesis. Facing costly external financing induced by economic policy-related uncertainty and geopolitical tension, Saudi firms tend to accumulate cash as a buffer against negative shocks to their cash flows. The results also show that the positive impact of EPU and GPR on the level of cash holding is less pronounced in Shariah-compliant firms, whereas it is more pronounced in more financially constrained firms. Evidence also reveals that the estimated adjustment coefficients show that Saudi firms adjust more quickly toward their target cash ratio in periods of high economic instability and geopolitical risks.

Practical implications

This study has important implications for managers, policymakers and regulators. For managers, the study is an important reference to understand and design cash management policies by considering factors measured at the country level. More specifically, managers should pay more attention to periods of heightened uncertainties and geopolitical tensions in which the availability of funds is reduced. For policymakers and regulators, this study may be useful in assessing the effect of economic instability on firm’s cash holding decision. Therefore, in an effort to increase the supply of external financing available to firms, policymakers may devise investment friendly environment by controlling country-specific factors.

Originality/value

This paper shows how EPU and GPR as institutional environment factors affect cash holding decision in an oil-rich country.

Details

Arab Gulf Journal of Scientific Research, vol. 41 no. 2
Type: Research Article
ISSN: 1985-9899

Keywords

Available. Open Access. Open Access
Article
Publication date: 20 September 2024

Khalid Rasheed Al-Adeem

In countries where disclosing and reporting matters on sustainability are optional, what are the drivers promoting voluntarily disclosing information related to social…

672

Abstract

Purpose

In countries where disclosing and reporting matters on sustainability are optional, what are the drivers promoting voluntarily disclosing information related to social responsibility and environmental sustainability corporate environmental and social responsibility? Exploring drivers promoting the demand for voluntarily disclosing information related to social responsibility and environmental sustainability in Saudi Arabia, where regulatory and professional bodies have not mandated information on corporate environmental and social responsibility, motivates this study.

Design/methodology/approach

A total of 48 individuals voluntarily participated in the survey.

Findings

Findings reveal that creating a better social, ethical and mental image, building a public relations image for the company, improving stakeholder trust in the company, signaling to investors the company’s care for the earth to meet the ethical motivation of stakeholders, enhancing corporate social responsibility awareness and exhibiting surpasses the mere generation of profits, all derive such disclosure. Such disclosure also signifies the firm’s value as well as improves the overall firm’s economic performance.

Practical implications

Regulatory and professional bodies must issue and adopt reporting models for entities, principally private companies, whether publicly traded or not, of the content. Their reports should aim to inform users and stakeholders about fulfilling the social and environmental responsibilities of entities toward society and its members.

Social implications

Out of the drivers for the demand, perceptions of elders toward meeting ethical motivation of senior management significantly differ from that of younger.

Originality/value

Few studies have been attempted on drivers of the demand for reporting environmental sustainability and social responsibility in an environment where such reporting is not mandated. This study offers insight from Saudi Arabian corporate reports.

Details

Journal of Ethics in Entrepreneurship and Technology, vol. 4 no. 1
Type: Research Article
ISSN: 2633-7436

Keywords

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