Corruption and cash holdings: Evidence from emerging market economies

We examine the effect of corruption on cash holdings and cash value using a panel data set of 4236 firms from 16 emerging market economies. We find that the cash holdings are positively related to the corruption and by managing their cash holdings upwards, the firms can benefit in the corrupt enviro...

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Bibliographic Details
Published in:Emerging markets review 2019-03, Vol.38, p.1-17
Main Authors: Thakur, Bhanu Pratap Singh, Kannadhasan, M.
Format: Article
Language:English
Subjects:
Cash holdings
Corruption
Emerging markets
Value of cash
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Summary:We examine the effect of corruption on cash holdings and cash value using a panel data set of 4236 firms from 16 emerging market economies. We find that the cash holdings are positively related to the corruption and by managing their cash holdings upwards, the firms can benefit in the corrupt environment by trading cash. Furthermore, cash holding adds value to the firms. However, it is insignificant when the firms are operating in high corruption environment with low investor protection. Overall, the evidence suggests that corruption play an important role in shaping the cash policies of firms in emerging markets. •This study examines the effect of corruption on cash holdings and cash value.•The cash holdings are positively related to the corruption.•By managing cash holdings upwards, firms can benefit in the corrupt environment.•In addition, cash holding adds value to the firms.•However, the relationship is insignificant in low investor protection environment.
ISSN:1566-0141
1873-6173
DOI:10.1016/j.ememar.2018.11.008