Do business groups affect corporate cash holdings? Evidence from a transition economy

China Journal of Accounting Research

Edward Lee¹  Cheng (Colin) Zeng¹  Weixing Cai²  Neslihan Ozkan³ 

[1] Alliance Manchester Business School, University of Manchester, United Kingdom;Dongling School of Economics and Management, University of Science and Technology Beijing, China;School of Economics, Finance and Management, University of Bristol, United Kingdom;

关键词: Business groups;    Cash holdings;    China;    State ownership;    Monetary policy;   

DOI  :  10.1016/j.cjar.2015.10.002

来源: DOAJ

【 摘 要 】

We examine whether business groups’ influence on cash holdings depends on ownership. Group affiliation can increase firms’ agency costs or benefit firms by providing an internal capital market, especially in transition economies characterized by weak investor protection and difficult external capital acquisition. A hand-collected dataset of Chinese firms reveals that group affiliation decreases cash holdings, alleviating the free-cash-flow problem of agency costs. State ownership and control of listed firms moderate this benefit, which is more pronounced when the financial market is less liquid. Group affiliation facilitates related-party transactions, increases debt capacity and decreases investment-cash-flow sensitivity and overinvestment. In transitional economies, privately controlled firms are more likely to benefit from group affiliation than state-controlled firms propped up by the government.

【 授权许可】

Unknown