Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/187649
Authors: 
Cai, Weixing
Zeng, Cheng
Lee, Edward
Ozkan, Neslihan
Year of Publication: 
2016
Citation: 
[Journal:] China Journal of Accounting Research [ISSN:] 1755-3091 [Volume:] 9 [Year:] 2016 [Issue:] 1 [Pages:] 1-24
Abstract: 
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.
Subjects: 
Business groups
Cash holdings
China
State ownership
Monetary policy
JEL: 
G32
G34
G38
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0/
Document Type: 
Article
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