Van Son Lai, Duc Khuong Nguyen, William Sodjahin and Issouf Soumaré
We identify a novel concept of discretionary idiosyncratic volatility proxied by the idiosyncratic volatility component not related to the non-systematic industry volatility as a…
Abstract
We identify a novel concept of discretionary idiosyncratic volatility proxied by the idiosyncratic volatility component not related to the non-systematic industry volatility as a source of agency problems that have implications for firms’ cash holdings and their investment decisions. We find that firms with low discretionary idiosyncratic volatility, which likely captures discretionary effort and risk-taking by managers, have smaller cash reserves. Moreover, while high discretionary idiosyncratic volatility firms spend cash internally (internal capital building), low discretionary idiosyncratic volatility firms use it for external acquisitions, consistent with the “quiet life” hypothesis. Our findings thus indicate a need for reinforcement of existing regulations and corporate laws to control for agency costs, which could in turn reduce firm risk and the probability of financial meltdown at the aggregate level.
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Santanu Das, Ashish Kumar and Asit Bhattacharyya
The purpose of this study is to understand how the business environment of a country has an impact on cash management policies of the firms and also to investigate if there is any…
Abstract
Purpose
The purpose of this study is to understand how the business environment of a country has an impact on cash management policies of the firms and also to investigate if there is any asymmetry in cash adjustment dynamics when a firm deviates from its long-term target of cash holdings.
Design/methodology/approach
Using a sample of seven emerging Asian countries in the period 2001–2019, the authors investigate the role of country specific variables in the corporate cash holdings and their cash adjustment mechanism. They use the panel data regression method to estimate the results.
Findings
The authors find that the overall financial development of a country has a significant impact on corporate cash holdings and cash adjustment dynamics. When a firm has excess cash, the speed of adjustment towards the target is faster as compared to when it has deficit cash holdings. Further, when a firm holds excess cash, it adjusts towards the target using cash from investments; in case of deficit cash holdings, the adjustment happens via cash from financing activities.
Practical implications
The results of the study are helpful to corporate managers as these are important references to them to understand and design cash management policies by considering factors that are measured at the country level. It also provides them a clearer understanding about the role of corporate board and information asymmetry in cash holdings.
Originality/value
This is the first study which examines the role of country-specific variables on corporate cash holdings and their adjustment mechanism of firms in emerging Asia. Further, the study extends the literature by providing new evidence that there is asymmetry in cash adjustment dynamics of firms after controlling for the overall financial development of a country.
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Ahmed Al Mubarak and Evangelos Giouvris
Our purpose is to explore how culture’s impact on investment is depending on uncertainty levels.
Abstract
Purpose
Our purpose is to explore how culture’s impact on investment is depending on uncertainty levels.
Design/methodology/approach
This study investigates the interplay between national culture, uncertainty, and corporate investment decisions. Focusing on the uncertainty avoidance dimension (HUA) from Hofstede’s culture framework and utilizing the World Uncertainty Index (WUI) as a measure of uncertainty, this research explores how culture’s impact on investment is depending on uncertainty levels.
Findings
Our results reveal that high HUA countries lower long-term investment during periods of heightened uncertainty, particularly in riskier investments like R&D, rather than capital expenditure. This relation is more pronounced for smaller firms. The findings suggest that HUA is associated with less risk taking, primarily when uncertainty is high. Furthermore, we demonstrate that the interaction between HUA and uncertainty exerts more significant and consistent effects on corporate investment than other cultural dimensions, religion, and various formal institutions, contrary to prevailing literature.
Originality/value
This study looks at the relationship between national culture and corporate investment under ambiguity, and what are the implications for risk taking. If national culture is related to riskier investments, such as R&D, relative to safer investments, like capital expenditure this would imply that risk taking is explaining the relationship between national culture and corporate investment. This relation should be clear during uncertain times. This is the first study to include the moderating effects of the level of uncertainty on the relation between national culture and corporate investment (or financial decisions in general).
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Ben Amoako-Adu, Vishaal Baulkaran and Brian F. Smith
The chapter investigates three channels through which private benefits are hypothesized to be extracted in dual class companies: excess executive compensation, excess capital…
Abstract
Purpose
The chapter investigates three channels through which private benefits are hypothesized to be extracted in dual class companies: excess executive compensation, excess capital expenditures and excess cash holdings.
Design/methodology/approach
With a propensity score matched sample of S&P 1500 dual class and single class companies with concentrated control, the chapter analyzes the relationship between the valuation discount of dual class companies and measures of excess executive compensation, excess capital expenditure and excess cash holdings.
Findings
Executives in dual class firms earn greater compensation relative to their counterparts in single class firms. This excess compensation is more pronounced when the executive is a family member. The value of dual class shares is discounted most when cash holdings and executive compensation of dual class are excessive. Excess compensation is highest for executives who are family members of dual class companies. The dual class discount is not related to excess capital expenditures.
Originality/value
The research shows that the discount in the value of dual class shares in relation to the value of closely controlled single class company shares is directly related to the channels through which controlling shareholder-managers can extract private benefits.
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Rachel Williamson and Rebecca Jesson
This paper aims to investigate the viability of blogging over the summer holidays as an intervention to ameliorate the Summer Learning Effect (SLE) in writing. The SLE is the…
Abstract
Purpose
This paper aims to investigate the viability of blogging over the summer holidays as an intervention to ameliorate the Summer Learning Effect (SLE) in writing. The SLE is the impact on achievement of taking a break from school over summer, and has been documented to affect differentially those students who come from low socioeconomic status (SES) communities compared with their more affluent peers. However, previous studies within similar communities suggest that the effect is not inevitable, and is amenable to intervention.
Design/methodology/approach
The present study is set in a group of low SES schools where students already have individual learning blogs. The Summer Learning Journey was designed by the research team in consultation with students and teachers from the schools and trialled in January 2015. The design of the programme drew on previous research that suggested that students would be motivated by interest, rather than achievement, and that literacy activity over summer should be leisure-based.
Findings
Initial evidence suggests that students who participated made measurable improvements compared with their own progress over the previous summer and also compared with a matched control group of students, and that the observed difference continued over the 2016 school year.
Research limitations/implications
The study provides initial evidence of quite substantial differences in achievement for those students who were active bloggers.
Originality/value
The study provides an alternative direction from current summer learning programmes and indicates the potential for designing digital opportunities for learning at times when the school is not in session.