Skip to main content
Erschienen in:

18.07.2023

Political culture and corporate cash holdings

verfasst von: Chih-Huei Banks, Huajing Hu, Katarzyna Platt

Erschienen in: Journal of Economics and Finance | Ausgabe 3/2023

Einloggen, um Zugang zu erhalten

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config
loading …

Abstract

Do political beliefs matter for corporate cash-holding behavior? In this paper, we analyze whether the political preferences of managers affect their cash holdings. Using a composite political index to measure corporate political culture, we find that firms with Republican-leaning managers hold significantly less cash than firms managed by Democrats. We attribute the lower-level cash holdings of Republican firms to more conservative corporate policies, indicated by lower risk exposure, lower R&D expenditure, lower capital investment, and higher profitability. Our results survive various robustness tests, such as state-fixed effects and IV tests.

Sie möchten Zugang zu diesem Inhalt erhalten? Dann informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Anhänge
Nur mit Berechtigung zugänglich
Fußnoten
1
According to the 2021 Gallup poll, 74% of Republicans self-identify as conservative, 22% as moderate, and just 4% as liberal. In contrast, 12% of Democrats self-identify as conservative, 37% as moderate, and 50% as liberal.
 
Literatur
Zurück zum Zitat Abernethy MA, Li W, Zhang Y, Shi H (2022) Firm culture and internal control system. Account Finance 00:1–27 Abernethy MA, Li W, Zhang Y, Shi H (2022) Firm culture and internal control system. Account Finance 00:1–27
Zurück zum Zitat Abramowitz AI, Saunders KL (2006) Exploring the bases of partisanship in the American electorate: Social identity vs. ideology. Polit Res Q 59(2):175–187 Abramowitz AI, Saunders KL (2006) Exploring the bases of partisanship in the American electorate: Social identity vs. ideology. Polit Res Q 59(2):175–187
Zurück zum Zitat Acharya VV, Almeida H, Campello M (2007) Is cash negative debt? A hedging perspective on corporate financial policies. J Financ Int 16(4):515–554 Acharya VV, Almeida H, Campello M (2007) Is cash negative debt? A hedging perspective on corporate financial policies. J Financ Int 16(4):515–554
Zurück zum Zitat Acharya V, Davydenko SA, Strebulaev IA (2012) Cash holdings and credit risk. Rev Finan Stud 25(12):3572–3609CrossRef Acharya V, Davydenko SA, Strebulaev IA (2012) Cash holdings and credit risk. Rev Finan Stud 25(12):3572–3609CrossRef
Zurück zum Zitat Adhikari BK, Agrawal A (2016) Does local religiosity matter for bank risk-taking? J Corp Finan 38(2016):272–293CrossRef Adhikari BK, Agrawal A (2016) Does local religiosity matter for bank risk-taking? J Corp Finan 38(2016):272–293CrossRef
Zurück zum Zitat Bates TW, Kahle KM, Stulz RM (2009) Why do U.S. firms hold so much more cash than they used to? J Finan 64:1985–2021CrossRef Bates TW, Kahle KM, Stulz RM (2009) Why do U.S. firms hold so much more cash than they used to? J Finan 64:1985–2021CrossRef
Zurück zum Zitat Berry-Stölzle TR, Irlbeck S (2021) Religiosity and risk-taking: Is there a demand-side effect? J Corp Finan 71:102–117CrossRef Berry-Stölzle TR, Irlbeck S (2021) Religiosity and risk-taking: Is there a demand-side effect? J Corp Finan 71:102–117CrossRef
Zurück zum Zitat Bhandari A, Golden J (2021) CEO political preference and credit ratings. J Corp Finan 68:101909CrossRef Bhandari A, Golden J (2021) CEO political preference and credit ratings. J Corp Finan 68:101909CrossRef
Zurück zum Zitat Bhandari A, Golden J, Thevenot M (2020) CEO political ideologies and auditor-client contracting. J Account Public Policy 39(5):106755CrossRef Bhandari A, Golden J, Thevenot M (2020) CEO political ideologies and auditor-client contracting. J Account Public Policy 39(5):106755CrossRef
Zurück zum Zitat Bhojraj S, Sengupta P (2003) Effect of corporate governance on bond ratings and yields: The role of institutional investors and outside directors. J Bus 76(3):455–475CrossRef Bhojraj S, Sengupta P (2003) Effect of corporate governance on bond ratings and yields: The role of institutional investors and outside directors. J Bus 76(3):455–475CrossRef
Zurück zum Zitat Boubakri N, Chkir I, Saadi S, Zhu H (2021) Does national culture affect corporate innovation? International evidence. J Corp Finan 66:101847CrossRef Boubakri N, Chkir I, Saadi S, Zhu H (2021) Does national culture affect corporate innovation? International evidence. J Corp Finan 66:101847CrossRef
Zurück zum Zitat Chen X, Harford J, Li K (2007) Monitoring: Which institutions matter? J Financ Econ 86(2):279–305CrossRef Chen X, Harford J, Li K (2007) Monitoring: Which institutions matter? J Financ Econ 86(2):279–305CrossRef
Zurück zum Zitat Chen Y, Dou PY, Rhee SG, Truong C, Veeraraghavan M (2015) National culture and corporate cash holdings around the world. J Bank Finance 50:1–18CrossRef Chen Y, Dou PY, Rhee SG, Truong C, Veeraraghavan M (2015) National culture and corporate cash holdings around the world. J Bank Finance 50:1–18CrossRef
Zurück zum Zitat Christensen DM, Dhaliwal DS, Boivie S, Graffin SD (2015) Top management conservatism and corporate risk strategies: Evidence from managers’ personal political orientation and corporate tax avoidance. Strateg Manag J 36(12):1918–1938CrossRef Christensen DM, Dhaliwal DS, Boivie S, Graffin SD (2015) Top management conservatism and corporate risk strategies: Evidence from managers’ personal political orientation and corporate tax avoidance. Strateg Manag J 36(12):1918–1938CrossRef
Zurück zum Zitat Cooper MJ, Gulen H, Ovtchinnikov AV (2010) Corporate political contributions and stock returns. J Financ 65(2):687–724CrossRef Cooper MJ, Gulen H, Ovtchinnikov AV (2010) Corporate political contributions and stock returns. J Financ 65(2):687–724CrossRef
Zurück zum Zitat Cronqvist H, AK Makhija, SE Yonker (2012) Behavioral consistency in corporate finance: CEO personal and corporate leverage. J Finan Econ 103(1):20–40 Cronqvist H, AK Makhija, SE Yonker (2012) Behavioral consistency in corporate finance: CEO personal and corporate leverage. J Finan Econ 103(1):20–40
Zurück zum Zitat DeAngelo H, DeAngelo L, Stulz RM (2006) Dividend policy and the earned/contributed capital mix: A test of the lifecycle theory. J Financ Econ 81:227–254CrossRef DeAngelo H, DeAngelo L, Stulz RM (2006) Dividend policy and the earned/contributed capital mix: A test of the lifecycle theory. J Financ Econ 81:227–254CrossRef
Zurück zum Zitat Denis DJ, Sibilkov V (2009) Financial constraints, investment, and the value of cash holdings. Rev Finan Stud 23(1):247–269CrossRef Denis DJ, Sibilkov V (2009) Financial constraints, investment, and the value of cash holdings. Rev Finan Stud 23(1):247–269CrossRef
Zurück zum Zitat Denis DJ, Osobov I (2008) Why do firms pay dividends? International evidence on the determinants of dividend policy. J Financ Econ 89(1):62–82 Denis DJ, Osobov I (2008) Why do firms pay dividends? International evidence on the determinants of dividend policy. J Financ Econ 89(1):62–82
Zurück zum Zitat Di Giuli A, Kostovetsky L (2014) Are red or blue companies more likely to go green? Politics and corporate social responsibility. J Financ Econ 111(1):158–180CrossRef Di Giuli A, Kostovetsky L (2014) Are red or blue companies more likely to go green? Politics and corporate social responsibility. J Financ Econ 111(1):158–180CrossRef
Zurück zum Zitat Dittmar A, Mahrt-Smith J (2007) Corporate governance and the value of cash holdings. J Financ Econ 83(3):599–634CrossRef Dittmar A, Mahrt-Smith J (2007) Corporate governance and the value of cash holdings. J Financ Econ 83(3):599–634CrossRef
Zurück zum Zitat Elnahas AM, Kim D (2017) CEO political ideology and mergers and acquisitions decisions. J Corp Finan 45:162–175CrossRef Elnahas AM, Kim D (2017) CEO political ideology and mergers and acquisitions decisions. J Corp Finan 45:162–175CrossRef
Zurück zum Zitat Francis BB, Hasan I, Sun X, Wu Q (2016) CEO political preference and corporate tax sheltering. J Corp Finan 38:37–53CrossRef Francis BB, Hasan I, Sun X, Wu Q (2016) CEO political preference and corporate tax sheltering. J Corp Finan 38:37–53CrossRef
Zurück zum Zitat Gompers PA, Ishii JL, Metrick A (2003) Corporate governance and equity prices. Quart J Econ 118(1):107–155CrossRef Gompers PA, Ishii JL, Metrick A (2003) Corporate governance and equity prices. Quart J Econ 118(1):107–155CrossRef
Zurück zum Zitat Graham J, Haidt J, Nosek BA (2009) Liberals and conservatives rely on different sets of moral foundations. J Pers Soc Psychol 96(5):1029CrossRef Graham J, Haidt J, Nosek BA (2009) Liberals and conservatives rely on different sets of moral foundations. J Pers Soc Psychol 96(5):1029CrossRef
Zurück zum Zitat Guiso L, Sapienza P, Zingales L (2015) The value of corporate culture. J Financ Econ 117(1):60–76CrossRef Guiso L, Sapienza P, Zingales L (2015) The value of corporate culture. J Financ Econ 117(1):60–76CrossRef
Zurück zum Zitat Han S, Qiu J (2007) Corporate precautionary cash holdings. J Corp Finan 13(1):43–57CrossRef Han S, Qiu J (2007) Corporate precautionary cash holdings. J Corp Finan 13(1):43–57CrossRef
Zurück zum Zitat Hardford J (1999) Corporate cash reserves and acquisitions. J Financ 54(6):1969–1997CrossRef Hardford J (1999) Corporate cash reserves and acquisitions. J Financ 54(6):1969–1997CrossRef
Zurück zum Zitat Hardford J, Mansi S, Maxwell W (2008) Corporate governance and firm cash holdings. J Financ Econ 87:535–555CrossRef Hardford J, Mansi S, Maxwell W (2008) Corporate governance and firm cash holdings. J Financ Econ 87:535–555CrossRef
Zurück zum Zitat Hartzell JC, Starks LT (2003) Institutional investors and executive compensation. J Financ 58(6):2351–2374CrossRef Hartzell JC, Starks LT (2003) Institutional investors and executive compensation. J Financ 58(6):2351–2374CrossRef
Zurück zum Zitat Haushalter D, Klasa S, Maxwell WF (2007) The influence of product market dynamics on a firm’s cash holdings and hedging behavior. J Financ Econ 84(3):797–825CrossRef Haushalter D, Klasa S, Maxwell WF (2007) The influence of product market dynamics on a firm’s cash holdings and hedging behavior. J Financ Econ 84(3):797–825CrossRef
Zurück zum Zitat Hu H, Lian Y, Zhou W (2019) Do local protestant values affect corporate cash holdings? J Bus Ethics 154:147–166 Hu H, Lian Y, Zhou W (2019) Do local protestant values affect corporate cash holdings? J Bus Ethics 154:147–166
Zurück zum Zitat Hutton I, Jiang D, Kumar A (2014) Corporate policies of Republican managers. J Finan Quant Anal 49(5–6):1279–1310CrossRef Hutton I, Jiang D, Kumar A (2014) Corporate policies of Republican managers. J Finan Quant Anal 49(5–6):1279–1310CrossRef
Zurück zum Zitat Hutton I, Jiang D, Kumar A (2015) Political Values, Culture, and Corporate Litigation. Manage Sci 61(12):2905–2925CrossRef Hutton I, Jiang D, Kumar A (2015) Political Values, Culture, and Corporate Litigation. Manage Sci 61(12):2905–2925CrossRef
Zurück zum Zitat Jensen MC (1986) Agency costs of free cash flow, corporate finance, and takeovers. Am Econ Rev 76(2):323–329 Jensen MC (1986) Agency costs of free cash flow, corporate finance, and takeovers. Am Econ Rev 76(2):323–329
Zurück zum Zitat Jost JT (2006) The end of the end of ideology. Am Psychol 61:651–670CrossRef Jost JT (2006) The end of the end of ideology. Am Psychol 61:651–670CrossRef
Zurück zum Zitat Jost JT, Glaser J, Kruglanski AW, Sulloway FJ (2003) Political conservatism as motivated social cognition. Psychol Bull 129(3):339CrossRef Jost JT, Glaser J, Kruglanski AW, Sulloway FJ (2003) Political conservatism as motivated social cognition. Psychol Bull 129(3):339CrossRef
Zurück zum Zitat Jost JT, Napier JL, Thorisdottir H, Gosling SD, Palfai TP, Ostafin B (2007) Are needs to manage uncertainty and threat associated with political conservatism or ideological extremity? Pers Soc Psychol Bull 33:989–1007CrossRef Jost JT, Napier JL, Thorisdottir H, Gosling SD, Palfai TP, Ostafin B (2007) Are needs to manage uncertainty and threat associated with political conservatism or ideological extremity? Pers Soc Psychol Bull 33:989–1007CrossRef
Zurück zum Zitat Kam C, Simas EN (2010) Risk orientation and policy frames. J Polit 72(2):381–396CrossRef Kam C, Simas EN (2010) Risk orientation and policy frames. J Polit 72(2):381–396CrossRef
Zurück zum Zitat Keynes JM (1936) The general theory of employment, interest, and money. Harcourt Brace, London Keynes JM (1936) The general theory of employment, interest, and money. Harcourt Brace, London
Zurück zum Zitat Li K, Griffin D, Yue H, Zhao L (2013) How does culture influence corporate risk-taking? J Corp Finan 23:1–22CrossRef Li K, Griffin D, Yue H, Zhao L (2013) How does culture influence corporate risk-taking? J Corp Finan 23:1–22CrossRef
Zurück zum Zitat Liu Y, Mauer DC (2011) Corporate cash holdings and CEO compensation incentives. J Financ Econ 102(1):183–198CrossRef Liu Y, Mauer DC (2011) Corporate cash holdings and CEO compensation incentives. J Financ Econ 102(1):183–198CrossRef
Zurück zum Zitat McConnell JJ, Servaes H (1990) Additional evidence on equity ownership and corporate value. J Financ Econ 27(2):595–612CrossRef McConnell JJ, Servaes H (1990) Additional evidence on equity ownership and corporate value. J Financ Econ 27(2):595–612CrossRef
Zurück zum Zitat O’Reilly CA, Chatman JA (1996) Culture as social control: Corporations, cults, and commitment. In: BM Staw, Cummings LL (eds) Research in organizational behavior: An annual series of analytical essays and critical reviews, vol 18. Elsevier Science/JAI Press, pp 157–200 O’Reilly CA, Chatman JA (1996) Culture as social control: Corporations, cults, and commitment. In: BM Staw, Cummings LL (eds) Research in organizational behavior: An annual series of analytical essays and critical reviews, vol 18. Elsevier Science/JAI Press, pp 157–200
Zurück zum Zitat Opler T, Pinkowitz L, Stulz RM, Williamson R (1999) The determinants and implications of corporate cash holdings. J Financ Econ 52:3–46CrossRef Opler T, Pinkowitz L, Stulz RM, Williamson R (1999) The determinants and implications of corporate cash holdings. J Financ Econ 52:3–46CrossRef
Zurück zum Zitat Ovtchinnikov AV, Pantaleoni E (2012) Individual political contributions and firm performance. J Financ Econ 105(2):367–392CrossRef Ovtchinnikov AV, Pantaleoni E (2012) Individual political contributions and firm performance. J Financ Econ 105(2):367–392CrossRef
Zurück zum Zitat Palazzo B (2012) Cash holdings, risk, and expected returns. J Financ Econ 104(1):162–185CrossRef Palazzo B (2012) Cash holdings, risk, and expected returns. J Financ Econ 104(1):162–185CrossRef
Zurück zum Zitat Shleifer A, Vishny RW (1986) Large shareholders and corporate control. J Polit Econ 94(3 Part 1):461–488CrossRef Shleifer A, Vishny RW (1986) Large shareholders and corporate control. J Polit Econ 94(3 Part 1):461–488CrossRef
Zurück zum Zitat Unsal O, Hassan MK, Zirek D (2016) Corporate lobbying, CEO political ideology and firm performance. J Corp Finan 38:126–149CrossRef Unsal O, Hassan MK, Zirek D (2016) Corporate lobbying, CEO political ideology and firm performance. J Corp Finan 38:126–149CrossRef
Metadaten
Titel
Political culture and corporate cash holdings
verfasst von
Chih-Huei Banks
Huajing Hu
Katarzyna Platt
Publikationsdatum
18.07.2023
Verlag
Springer US
Erschienen in
Journal of Economics and Finance / Ausgabe 3/2023
Print ISSN: 1055-0925
Elektronische ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-023-09636-9

Weitere Artikel der Ausgabe 3/2023

Journal of Economics and Finance 3/2023 Zur Ausgabe

Premium Partner