Work

Agency Conflicts and Cash: Estimates from a Dynamic Model

Year: 2014

Type: article

Abstract: ABSTRACT Which agency problems affect corporate cash policy? To answer this question, we estimate a dynamic model of finance and investment with three mechanisms that misalign managerial and shareholder incentives: limited managerial ownership of the firm, compensation based on firm size, and managerial perquisite consumption. We find that perquisite consumption critically impacts cash policy. Size‐based compensation also matters, but less. Firms with lower blockholder and institutional ownership have higher managerial perquisite consumption, low managerial ownership is a key factor in the secular upward trend in cash holdings, and agency plays little role in small firms' substantial cash holdings.

Source: The Journal of Finance

DOI: 10.1111/jofi.12183

Authors: BORIS NIKOLOV, TONI M. WHITED

Institutions: Boston University, University of Washington, McGill University, University of Rochester, Carnegie Mellon University

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2165014400

FWCI: 43.94

Cites: 41

Cited by: 348

Related to: 9