Title
Corporate governance and cash policies of multinational corporations Corporate governance and cash policies of multinational corporations
Author
Faculty/Department
Faculty of Applied Economics
Publication type
report
Publication
Antwerp :UA, [*]
Subject
Economics
Source (series)
Research paper / UA, Faculty of Applied Economics ; 2011:020
Volume/pages
34 p.,
Carrier
E
Target language
English (eng)
Affiliation
University of Antwerp
Abstract
This study investigates cash policies of multinational corporations (MNCs) for a large sample of European MNCs and their subsidiaries in the period 1998-2004. The results are consistent with the hypothesis that cash holdings depend on a trade-off between the superior knowledge of the subsidiary over headquarters and the agency costs of discretionary behavior by the subsidiarys management. We find that foreign subsidiaries hold more cash than domestic subsidiaries, although geographical distance from headquarters does not seem to matter. Horizontal subsidiaries hold more cash than vertical subsidiaries. Furthermore, we find that subsidiaries hold more cash if they are located in a country with better law enforcement and lower corruption. This result is consistent with the argument that better corporate governance in the subsidiary country reduces the risk of expropriation by the subsidiary management. Finally, the availability of external finance in the subsidiary country reduces the level of subsidiary cash holdings.
Full text (open access)
https://repository.uantwerpen.be/docman/irua/0bbbd7/8d7b0170.pdf
Handle