Cash Holdings Adjustment Speed and Managerial Ability. (21st October 2018)

• Record Type: Journal Article
• Authors: Cho, Hyungjin; Choi, Sera; Kim, Mi‐Ok
• Is Part Of: Asia-Pacific journal of financial studies. Volume 47:Number 5(2018:Oct.)
• Page Start: 695
• Page End: 719
• Publication Date: 2018-10-21
• Subjects: Cash holdings -- Internal capital market -- Investment efficiency -- Managerial ability -- Partial adjustment model; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12235
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: Using the partial adjustment model of cash holding, we find that managerial ability is negatively related to adjustment speed of cash holdings toward the target, particularly when the firm has excess cash. We also find that the relation between managerial ability and cash holding adjustment speed is weaker in the presence of the internal capital market. Additionally, we provide evidence that firms with higher managerial ability are less likely to make inefficient investments when they have excess cash, implying that high‐ability managers are willing to hold a large amount of cash to make timely investments.