Corporate cash holdings and their implications on firm value in family and founder firms | Macquarie University ResearchOnline

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Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/192312

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Title: Corporate cash holdings and their implications on firm value in family and founder firms
Related: Corporate ownership and control, Vol. 9, Issue 4, (2012), p.309-326
Publisher: Virtus Interpress
Date: 2012
Author/Creator: Lau, James
Author/Creator: Block, Joern H
Description: This research investigates whether the presence of controlling founders and families has significant impact on the level of cash holdings, and their implications on firm value. The agency cost of cash holdings in founder firms is arguably less severe than family firms, due to founders’ economic incentives, strong psychological commitment and superior knowledge, whereas family firms are exposed to adverse selection and moral hazard as a result of altruism. Results indicate that founder firms hold a significantly higher level of cash holdings than family firms. In addition, there is a positive interaction effect between founder management and cash holdings on firm value, suggesting the presence of founders as managers helps to mitigate the agency costs of cash holdings.
Description: 18 page(s)
Subject Keyword: Corporate Cash Holdings
Subject Keyword: Founder Firms
Subject Keyword: Family Firms
Subject Keyword: Agency Theory
Resource Type: journal article
Organisation: Macquarie University. Dept. of Accounting and Corporate Governance

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