Please use this identifier to cite or link to this item:
http://hdl.handle.net/10397/94395
Title: | Information shocks and corporate cash policies | Authors: | Cheng, CSA Huang, Y Li, X |
Issue Date: | 2020 | Source: | Journal of international accounting research, Spring 2020, v. 19, no. 1, p. 5-28 | Abstract: | We examine how information environment affects corporate cash policy by examining the change in cash holdings around two events that lead to exogenous change in information environment, namely the initial enforcement of insider trading laws (ITLs) and the mandatory adoption of IFRS in European Union (EU) countries. Using a difference-in-differences approach, we find that firms decrease their cash holdings after both events. The decrease in cash holdings is more pronounced for firms with higher precautionary savings demand and with more severe agency problems. Additional tests show that the sensitivity of investment to cash holdings declines after the two events, consistent with the notion that the benefit of cash holdings in mitigating underinvestment and the private benefit of overinvesting cash holdings reduce after the events. Overall, our findings provide evidence that information environment improvements have real decision effects. | Keywords: | Cash holdings IFRS adoption Initial enforcement of insider trading laws Market friction |
Publisher: | International Accounting Section of the American Accounting Association | Journal: | Journal of international accounting research | EISSN: | 1542-6297 | DOI: | 10.2308/jiar-19-085 | Rights: | This is the accepted manuscript of the following article: Cheng, C. A., Huang, Y., & Li, X. (2020). Information shocks and corporate cash policies. Journal of International Accounting Research, 19(1), 5-28, which has been published in final form at https://doi.org/10.2308/jiar-19-085 |
Appears in Collections: | Journal/Magazine Article |
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Cheng_Information_Shocks_Corporate.pdf | Pre-Published version | 331.88 kB | Adobe PDF | View/Open |
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