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CEO organizational identification and firm cash holdings

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TLDR
Zhang et al. as mentioned in this paper investigated the association between CEO organizational identification and firm cash holdings, and found that the negative association is more pronounced when the level of financial development is higher and economic uncertainty is lower.
Abstract
As the decision-makers and implementers of a firm’s financial strategy, executives play a critical role in cash holding activities, and their psychological characteristics have a major impact on cash holdings. This paper investigates the association between CEO organizational identification and firm cash holdings. The empirical results show that CEO organizational identification is negatively associated with firm cash holdings, and the negative association is more pronounced when the level of financial development is higher and economic uncertainty is lower. Further analysis reveals that the higher a CEO’s organizational identification, the higher the firm’s R&D investment and capital expenditure, and high CEO organizational identification can increase the value of firm cash holdings. Overall, our findings supplement the literature on organizational identification and cash holdings, and on the effect of executives’ psychological characteristics on corporate financial decision-making.

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References
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Theory of the firm: Managerial behavior, agency costs and ownership structure

TL;DR: In this article, the authors draw on recent progress in the theory of property rights, agency, and finance to develop a theory of ownership structure for the firm, which casts new light on and has implications for a variety of issues in the professional and popular literature.
Posted Content

Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers

TL;DR: In this paper, the benefits of debt in reducing agency costs of free cash flows, how debt can substitute for dividends, why diversification programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, and why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil.
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Social Identity Theory and the Organization

TL;DR: This article argued that social identification is a perception of oneness with a group of persons, and social identification stems from the categorization of individuals, the distinctiveness and prestige of the group, the salience of outgroups, and the factors that traditionally are associated with group formation.
ReportDOI

Financial Dependence and Growth

TL;DR: This paper examined whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship; that financial development reduces the costs of external finance to firms, and found that industrial sectors that are relatively more in need of foreign finance develop disproportionately faster in countries with more developed financial markets.
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Financial Dependence and Growth

TL;DR: This paper examined whether financial development facilitates economic growth by scrutinizing one rationale for such a relationship: that financial development reduces the costs of external finance to firms, and they found that industrial sectors that are relatively more in need of foreign finance develop disproportionately faster in countries with more developed financial markets.
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How does CEO impact corporate cash holdings?

The paper states that CEO organizational identification is negatively associated with firm cash holdings. Higher CEO organizational identification can increase the value of firm cash holdings.