Political connections and the value of cash holdings

• Main Author: KUSNADI, Yuanto
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Corruption; Political connections; Value of cash holding; Accounting; Corporate Finance; Political Economy
• Online Access: https://ink.library.smu.edu.sg/soa_research/1794; https://ink.library.smu.edu.sg/context/soa_research/article/2821/viewcontent/1_s20_S1544612318303155_main.pdf
• Institution: Singapore Management University

This study examines how political connections influence the value of cash holdings in an international setting. The main finding reveals that political connections are not associated with the value of cash holdings in the overall sample. However, further analysis demonstrates that political connections are negatively associated with the value of cash holdings for firms inemerging markets and in countries with high levels of corruption. Moreover, the negative valuation of cash holdings is driven by firms that are connected through large shareholders. Overall, the findings provide new insights into the value relevance of cash holdings, especially for politically connected firms.