AffiliationEller College of Management, The University of Arizona
MetadataShow full item record
PublisherWORLD SCIENTIFIC PUBL CO PTE LTD
CitationCash Holdings and CEO Turnover 2016, 06 (04):1650022 Quarterly Journal of Finance
JournalQuarterly Journal of Finance
Rights© World Scientific Publishing Company and Midwest Finance Association
Collection InformationThis item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at firstname.lastname@example.org.
AbstractChief Executive Offier (CEO) characteristics, such as the level of risk aversion, are known to affect corporate financial policies, and therefore are likely to impact corporate liquidity decisions. We examine changes in cash holdings around CEO turnover events, a period in which discrete changes in managerial preferences and abilities are likely to have the most dramatic effect on cash holdings. Our results suggest that cash holdings increase significantly following forced departures. The increase is persistent over the successor's tenure and is robust to controls for the standard firm-level determinants of cash holdings and corporate governance characteristics. We find that higher cash holdings arise mainly through the management of net working capital, as opposed to asset sales or reductions in investment. This suggests that the changes are optimal for shareholders rather than an indication of serious agency problems. This conclusion is supported further by our finding that the marginal value of cash does not decrease following the turnover.
Note12 month embargo; Published: 1 July 2016
VersionFinal accepted manuscript