Work

Cash and Corporate Control

Year: 2004

Type: article

Abstract: ABSTRACT The takeover market is often suggested as appropriate for containing the agency problems of excessive corporate cash holdings. However, recent studies report contradictory evidence. I focus on the takeover‐deterrence effects of corporate liquidity and suggest the proxy contest as an effective alternative control mechanism. I find that proxy fight targets hold 23% more cash than comparable firms, and that the probability of a contest is significantly increasing in excess cash holdings. Proxy fight announcement return also is positively related to excess cash. Following a contest, executive turnover and special cash distributions to shareholders increase, while cash holdings significantly decline.

Source: The Journal of Finance

DOI: 10.1111/j.1540-6261.2004.00691.x

Author: OLUBUNMI FALEYE

Institutions: University of Lethbridge, Northeastern University, University of Wisconsin–Milwaukee

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: green

OpenAlex ID: W2127397261

FWCI: 22.13

Cites: 34

Cited by: 201

Related to: 10