Article (Scientific journals)
Geographic Location, Excess Control Rights, and Cash Holdings
Derouiche, Imen; Boubaker, Sabri; Meziane, Lasfer
2015In International Review of Financial Analysis, 42, p. 24-37
Peer reviewed
 

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Keywords :
Geography; Firm location; Excess control rights; Cash holdings
Abstract :
[en] We assess the extent to which remotely-located firms are likely to discretionarily accumulate cash rather than distribute it to shareholders. We consider that these firms are less subject to shareholder scrutiny and, thus, will have high agency conflicts as the distance will facilitate the extraction of private benefits. Consistent with our predictions, we find a positive relation between the distance to the main metropolitan area and cash holdings, and this impact is more pronounced when the controlling shareholder has high levels of excess control rights (i.e., separation of cash-flow rights and control rights). Our results hold even after accounting for all control variables, including financial constraints, and suggest that geographic remoteness can be conducive to severe agency problems, particularly when there is a large separation of cash-flow rights and control rights.
Disciplines :
Accounting & auditing
Author, co-author :
Derouiche, Imen ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Boubaker, Sabri;  Champagne School of Management, Groupe ESC Troyes, France
Meziane, Lasfer;  Cass Business School, City University London
External co-authors :
yes
Language :
English
Title :
Geographic Location, Excess Control Rights, and Cash Holdings
Publication date :
December 2015
Journal title :
International Review of Financial Analysis
ISSN :
1057-5219
Publisher :
Elsevier Science
Volume :
42
Pages :
24-37
Peer reviewed :
Peer reviewed
Focus Area :
Finance
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