Country-level Governance and Corporate Cash Holdings: Evidence in the United States, United Kingdom, Germany, and France

• Main Authors: Huang, Hsin-Yi, 黃馨儀
• Other Authors: Wang, Sue-Fung
• Format: Others
• Language: en_US
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/59246433506957149184

碩士 === 國立交通大學 === 財務金融研究所 === 99 === Based on the free cash flow hypothesis, firms that have more free cash flow are prone to agency problem. However, previous empirical studies suggest that a country with better country-level governance has higher shareholder rights and lower financial constraints; therefore, it is able to improve its corporate governance and avoid agency problem. Because the level of protection to shareholders in the common-law and in the civil-law countries is different, we use ordinary least-squares regression and panel regression to analyze whether country-level governance affects corporate cash holdings in the United States, United Kingdom, Germany, and France. We find that the common-law countries have more cash holdings than the civil-law countries. Our study reveals that higher country-level governance can decrease sensitivity between agency problem and corporate cash holdings.