Principal-principal conflicts and corporate cash holdings: Evidence from China

摘要

The study investigates the effect of principal-principal (PP) conflicts on corporate cash holdings. By examining a sample of Chinese listed firms over the period 2003-2016, we observe that PP conflicts are positively associated with cash holdings. Furthermore, we observe that institutional ownership attenuates the positive association between PP conflicts and cash holdings. Additional analysis reveals that the positive effect of PP conflicts on cash holdings is more pronounced for firms with high cash holdings than for those with low cash holdings. Overall, the results support the argument that controlling shareholders expropriate minority shareholders by holding larger cash reserves.