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Political culture and corporate cash holdings

Author

Listed:
  • Chih-Huei Banks

    (University of New Mexico, Anderson School of Management, 1 University of New Mexico)

  • Huajing Hu

    (Adelphi University, Robert B.Willumstad School of Business)

  • Katarzyna Platt

    (SUNY College at Old Westbury, School of Business)

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.

Suggested Citation

  • Chih-Huei Banks & Huajing Hu & Katarzyna Platt, 2023. "Political culture and corporate cash holdings," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(3), pages 541-563, September.
    • Handle: RePEc:spr:jecfin:v:47:y:2023:i:3:d:10.1007_s12197-023-09636-9
    DOI: 10.1007/s12197-023-09636-9
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    More about this item

    Keywords

    Political Culture; Cash Policy; Corporate Cash Holdings; Corporate Governance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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