Agency Conflicts and Cash: Estimates from a Dynamic Model
type="main"> <title type="main">ABSTRACT</title> <p>Which agency problems affect corporate cash policy? To answer this question, we estimate a dynamic model of finance and investment with three mechanisms that misalign managerial and shareholder incentives: limited managerial ownership of the firm, compensation based on firm size, and managerial perquisite consumption. We find that perquisite consumption critically impacts cash policy. Size-based compensation also matters, but less. Firms with lower blockholder and institutional ownership have higher managerial perquisite consumption, low managerial ownership is a key factor in the secular upward trend in cash holdings, and agency plays little role in small firms' substantial cash holdings.
Year of publication: |
2014
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Authors: | NIKOLOV, BORIS ; WHITED, TONI M. |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 69.2014, 5, p. 1883-1921
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Publisher: |
American Finance Association - AFA |
Saved in:
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