Work

Transient institutional ownership, costly external finance and corporate cash holdings

Year: 2024

Type: article

Abstract: We investigate and robustly show that transient institutional ownership (IO) has a positive effect on the level and value of corporate cash holdings. Further, using a regression discontinuity design exploiting the Russell 1000/2000 index reconstitution as an exogenous shock to transient IO, we show that the effects of transient IO on cash holdings are causal. Additionally, our analysis shows that transient institutions exacerbate debtholder–shareholder conflicts, thereby increasing the cost of debt. Overall, our results suggest that transient institutions make cash holdings more valuable because financing by debt becomes more costly.

Source: Journal of Business Finance &amp Accounting

DOI: 10.1111/jbfa.12840

Authors: Hyun Joong Im, Heungju Park, Shams Pathan, Robert Faff

Institutions: University of Seoul, Sungkyunkwan University, Newcastle University, Bond University, Corvinus University of Budapest, The University of Queensland

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: bronze

Funder: University of Seoul

OpenAlex ID: W4404552205

FWCI: 5.031

Cites: 81

Cited by: 6

Related to: 10