Reference : Family control and the value of cash holdings
Scientific journals : Article
Business & economic sciences : Accounting & auditing
Family control and the value of cash holdings
Derouiche, Imen mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Journal of Applied Business Research
Clute Institute
Yes (verified by ORBilu)
[en] Corporate governance; Family firms; ; Cash holdings; ; Firm value.
[en] The present study investigates the effects of family control on the value of corporate cash holdings. Using a large sample of French listed firms, the results show that the value of excess cash reserves is lower in family firms than in other firms, reflecting investors’ concern about the potential misuse of cash by controlling families. We also find that the value of excess cash is lower when controlling families are involved in management and when they maintain a grip on control, indicating that investors do not expect the efficient use of cash in these firms. Our findings are consistent with the argument that the extent to which excess cash contributes to firm value is lower when dominant shareholders are likely to expropriate firm resources. Overall, family control seems to be a key determinant of cash valuation when ownership is concentrated.

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