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Navigating the capital investment through national governance in BRICS economies: the role of cash holdings

Author

Listed:
  • Umar Farooq
  • Ahmad A. Al-Naimi
  • Muhammad Irfanullah Arfeen
  • Mohammad Ahmad Alnaimat

Abstract

Purpose - The current analysis aims to explore the role of cash holdings in the nexus of national governance and capital investment (CIN). Design/methodology/approach - To achieve this aim, the authors sample the nonfinancial enterprises from 5 Brazil, Russia, India, China, South Africa (BRICS) economies and employ system generalized method of moments(GMM) models as an estimation technique. Findings - The empirical analysis infers that national governance has a positive relationship with CIN and a negative relationship with cash holdings. The cash holdings negatively determine CIN. However, the cash holdings show a positive relationship with CIN in the presence of the national governance index (NGI). Research limitations/implications - The important policy layout of the current analysis is that corporate managers should reduce cash holdings during better governance situations. Alternatively, corporate managers can disentangle the negative impact of bad country governance conditions on CIN by holding more cash. Originality/value - The study is innovative as it explores mediating impact of cash holdings in the NGI-CIN nexus.

Suggested Citation

  • Umar Farooq & Ahmad A. Al-Naimi & Muhammad Irfanullah Arfeen & Mohammad Ahmad Alnaimat, 2023. "Navigating the capital investment through national governance in BRICS economies: the role of cash holdings," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 32(4), pages 606-627, November.
    • Handle: RePEc:eme:arapps:ara-02-2023-0043
    DOI: 10.1108/ARA-02-2023-0043
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    More about this item

    Keywords

    BRICS; Capital investment; Cash holdings; Country-level governance; Keynes theory of money holding; G31; G38;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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