Corporate cash holdings and promoter ownership
TL;DR: In this article, the authors examined the relationship between corporate cash holdings and promoter ownership for a sample of Indian non-financial firms and found that promoter ownership is negatively associated with cash holdings, thereby highlighting the role of large owners in preventing cash accretion.
About: This article is published in Emerging Markets Review.The article was published on 2020-09-01. It has received 18 citations till now. The article focuses on the topics: Cash management & Cash.
Citations
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TL;DR: In this article, the authors present methods that allow researchers to test causal claims in situations where randomization is not possible or when causal interpretation could be confounded; these methods include fixed-effects panel, sample selection, instrumental variable, regression discontinuity, and difference-in-differences models.
Abstract: Social scientists often estimate models from correlational data, where the independent variable has not been exogenously manipulated; they also make implicit or explicit causal claims based on these models. When can these claims be made? We answer this question by first discussing design and estimation conditions under which model estimates can be interpreted, using the randomized experiment as the gold standard. We show how endogeneity – which includes omitted variables, omitted selection, simultaneity, common-method variance, and measurement error – renders estimates causally uninterpretable. Second, we present methods that allow researchers to test causal claims in situations where randomization is not possible or when causal interpretation could be confounded; these methods include fixed-effects panel, sample selection, instrumental variable, regression discontinuity, and difference-in-differences models. Third, we take stock of the methodological rigor with which causal claims are being made in a social sciences discipline by reviewing a representative sample of 110 articles on leadership published in the previous 10 years in top-tier journals. Our key finding is that researchers fail to address at least 66% and up to 90% of design and estimation conditions that make causal claims invalid. We conclude by offering 10 suggestions on how to improve non-experimental research.
1,537 citations
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TL;DR: In this article , the authors investigate whether corporate cash holdings affect carbon dioxide emissions and find that carbon emissions are lower in firms with higher corporate cash holding. But, the effect of cash holdings on carbon emissions is more pronounced in firms having low leverage and less financial constraints.
10 citations
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TL;DR: In this article, the determination of corporate liquidity in Organization of Islamic Cooperation (OIC) countries with emphasis on whether and how national governance has bearings on corporate liquidity was investigated, and the results suggest that NG improves corporate governance in OIC countries.
8 citations
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TL;DR: Li et al. as discussed by the authors used manually collected data of Chinese listed non-financial corporations to find that multiple large shareholders inhibit performance sensitivity to forced CEO turnover and are unrelated to forced turnover-integrity sensitivity.
8 citations
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TL;DR: In this article , the authors examine how corporate governance forms like promoters' ownership, financial performance and market competition affect the distress of listed SMEs, both in the pre-COVID-19 era and during the COVID19 period.
Abstract: The multiple phase-wise lockdowns starting 24 March 2020, imposed to control COVID-19 spread in India, put a shrieking halt to industrial activities. Such nationwide lockdowns further exacerbated the financial distress, a long-standing challenge for small and medium-sized enterprises (SMEs). In this study, we examine how corporate governance forms like promoters’ ownership, financial performance and market competition affect the distress of listed SMEs, both in the pre-COVID-19 era and during the COVID-19 period. To do so, the study adopts a two-fold sampling and multi-methodology approach. First, by applying panel data analysis on the first sample of 80 listed SMEs for the financial year (FY), FY 2017–2018 to FY 2019–2020, pre-COVID-19 period results are obtained. Second, by applying cross-sectional analysis on the second sample of 155 listed SMEs for FY 2020–2021, results during the COVID-19 period are obtained. Main results indicate that previous years’ distress determines distress in the current year in the pre-COVID-19 era. In addition, promoters’ ownership and return on equity reduce the possibility of distress, while current period competition is insignificant. Conversely, COVID-19 can exacerbate distress and render promoters’ ownership insignificant. Furthermore, the COVID-19 period is characterized by reduced asset utilization. Therefore, any marginal increase in return on assets reduces distress. Interestingly, MC becomes an active determinant of distress during the COVID-19 pandemic. In summary, episodes like COVID-19 can modify the impact behaviour of the aforementioned determinants of distress. Notably, the results highlight the fragility of internal governance forms like ownership effects, while establishing the dominance of external factors like competition during the COVID-19 period.
6 citations
References
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TL;DR: In this article, the generalized method of moments (GMM) estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogenous variables.
Abstract: This paper presents specification tests that are applicable after estimating a dynamic model from panel data by the generalized method of moments (GMM), and studies the practical performance of these procedures using both generated and real data. Our GMM estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogenous variables. We propose a test of serial correlation based on the GMM residuals and compare this with Sargan tests of over-identifying restrictions and Hausman specification tests.
26,580 citations
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TL;DR: In this paper, two alternative linear estimators that are designed to improve the properties of the standard first-differenced GMM estimator are presented. But both estimators require restrictions on the initial conditions process.
19,132 citations
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TL;DR: In this paper, a framework for efficient IV estimators of random effects models with information in levels which can accommodate predetermined variables is presented. But the authors do not consider models with predetermined variables that have constant correlation with the effects.
16,245 citations
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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.
Abstract: The interests and incentives of managers and shareholders conflict over such issues as the optimal size of the firm and the payment of cash to shareholders. These conflicts are especially severe in firms with large free cash flows—more cash than profitable investment opportunities. The theory developed here explains 1) the benefits of debt in reducing agency costs of free cash flows, 2) how debt can substitute for dividends, 3) why “diversification” programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, 4) why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil, and 5) why bidders and some targets tend to perform abnormally well prior to takeover.
14,368 citations
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TL;DR: The authors argue that the separation of decision and risk-bearing functions observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, and nonprofits. But they do not consider the role of decision agents in these organizations.
Abstract: ABSENT fiat, the form of organization that survives in an activity is the one that delivers the product demanded by customers at the lowest price while covering costs.1 Our goal is to explain the survival of organizations characterized by separation of "ownership" and "control"-a problem that has bothered students of corporations from Adam Smith to Berle and Means and Jensen and Meckling.2 In more precise language, we are concerned with the survival of organizations in which important decision agents do not bear a substantial share of the wealth effects of their decisions. We argue that the separation of decision and risk-bearing functions observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, and nonprofits. We contend that separation of decision and risk-bearing functions survives in these organizations in part because of the benefits of specialization of
14,045 citations