Corporate cash holdings: An empirical investigation of UK companies

This paper investigates the empirical determinants of corporate cash holdings for a sample of UK firms. We focus on the importance of managerial ownership among other corporate governance characteristics including board structure and ultimate controllers of companies. We present evidence of a signif...

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Bibliographic Details
Published in:Journal of banking & finance 2004-09, Vol.28 (9), p.2103-2134
Main Authors: Ozkan, Aydin, Ozkan, Neslihan
Format: Article
Language:English
Subjects:
Bank structure
Banking
Business ownership
Cash holdings
Cash management
Corporate governance
Correlation analysis
Data analysis
Enterprises
Finance
Firm heterogeneity
Firm theory
Ownership
Ownership structure
Panel data
Panel surveys
Studies
United Kingdom
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Summary:This paper investigates the empirical determinants of corporate cash holdings for a sample of UK firms. We focus on the importance of managerial ownership among other corporate governance characteristics including board structure and ultimate controllers of companies. We present evidence of a significant non-monotonic relation between managerial ownership and cash holdings. In addition, we observe that the way in which managerial ownership exerts influence on cash holdings does not change with board composition and, in general, the presence of ultimate controllers. The results reveal that firms' growth opportunities, cash flows, liquid assets, leverage and bank debt are important in determining cash holdings. Our analysis also suggests that firm heterogeneity and endogeneity are crucial in analysing the cash structure of firms.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2003.08.003