Abstract
We examine the determinants of corporate cash management policy across a broad sample of international firms. We find that firms in countries with strong legal protection of minority investors are more likely to decrease (increase) their cash holdings in response to an increase in cash flow (stock price) than are firms in countries with weak legal protection. In addition, financially constrained firms display higher sensitivities of cash to both cash flow and stock prices than do financially unconstrained firms. The results are robust to alternative specifications. Our findings highlight the importance of both country-level institutional factors and firm-level financial constraints in managers' corporate cash management policies.
| Original language | English |
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| Publication status | Published - 27 Aug 2008 |
| Event | 35th European Finance Association Annual Meeting - Athens, Greece Duration: 27 Aug 2008 → 30 Aug 2008 |
Conference
| Conference | 35th European Finance Association Annual Meeting |
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| Country/Territory | Greece |
| City | Athens |
| Period | 27/08/08 → 30/08/08 |