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Large state-owned shareholders and cash holding: Evidence from family firms

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  • Wu, Ying
  • Chang, Qi

Abstract

This paper investigates the effect of large state-owned shareholders on cash holding in family firms. Using a large sample of Chinese listed family firms for 2012–2022, we find that large state-owned shareholders positively impact cash holding in family firms. The finding remains valid to a battery of sensitivity tests and is attenuated for family firms with higher control power of the controlling shareholder, family firms originating from the privatization of state-owned enterprises, and family firms located in regions with lower levels of institutional development. Economic mechanism tests show that large state-owned shareholders increase cash holding in family firms by reducing related-party transactions and perk consumption. These findings support the view that better corporate governance may increase corporate cash holding and suggest that state-owned ownership is an essential variable in the predictors of cash holding in family firms.

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  • Wu, Ying & Chang, Qi, 2024. "Large state-owned shareholders and cash holding: Evidence from family firms," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
  • Handle: RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001252
    DOI: 10.1016/j.pacfin.2024.102374
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    More about this item

    Keywords

    Large state-owned shareholders; Family firms; Cash holding; Corporate governance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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