Title
Cash holdings and business group membership
Author
Publication type
article
Publication
New York ,
Subject
Economics
Source (journal)
Journal of business research. - New York
Volume/pages
67(2014) :3 , p. 316-323
ISSN
0148-2963
ISI
000330154200013
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Abstract
This study examines the cash policies of business group members (i.e., affiliates). Using a panel dataset of private Belgian affiliates and comparable non-affiliated firms, the empirical results show that business group affiliates hold significantly smaller amounts of cash as compared to non-affiliated firms. This finding is consistent with the notion that affiliates can afford to keep lower cash reserves because these firms can access the internal capital market of the group. The analysis also combines affiliate level and group level data to evaluate cash drivers and shows that groups in financial distress reduce cash holdings in affiliates. However, affiliates that are more important for the group's reputation and operations maintain cash levels comparable to affiliates belonging to financially healthy groups. (C) 2013 Elsevier Inc. All rights reserved.
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