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Do Firm-Bank Relationships Affect Corporate Cash Holdings?

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  • Andriy Tsapin

    (National Bank of Ukraine
    National University of Ostroh Academy)

Abstract

This paper explores the impact of firm-bank relationships on corporate cash holdings using a sample of more than 4,000 Ukrainian companies over the period from 2008 to 2015. The empirical evidence suggests that the duration of the relationship and the presence of multiple bank relationships affect corporate cash holdings. Specifically, an increase in the length of a bank’s relationship with a main bank initially reduces corporate cash holdings but the effect turns positive due to the hold-up problem when the relationship matures. We also observe that companies with a greater number of bank relationships tend to hold more cash reserves, whereas more competition among banks allows firms to hold less cash. Additionally, we document that firm-bank relationships are important in helping firms resolve agency conflicts and facilitate reducing a firm’s financial constraints.

Suggested Citation

  • Andriy Tsapin, 2017. "Do Firm-Bank Relationships Affect Corporate Cash Holdings?," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 241, pages 5-20.
    • Handle: RePEc:ukb:journl:y:2017:i:241:p:5-20
    DOI: 10.26531/vnbu2017.241.005
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    References listed on IDEAS

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    More about this item

    Keywords

    Cash holdings; firm-bank relationships; financial constraints; managerial discretion;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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