Organization capital and corporate cash holdings

Alex Marwick, Mostafa Monzur Hasan*, Tianpei Luo

*Corresponding author for this work

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This paper investigates the relationship between organization capital and corporate cash holdings. We develop two competing hypotheses in relating organization capital with cash holding. Our analysis reveals that organization capital is related to high levels of cash holdings. Moreover, we find that the effect of organization capital on corporate cash holdings is stronger for firms experiencing high levels of financing constraint and cash flow risk. Our results remain robust to alternative measures of organization capital and corporate cash holdings, and are not driven by omitted variable bias or endogeneity issues. We also find that the positive relation between organization capital and cash holdings is not confounded by sample period or industry group. Overall, we provide robust evidence that supports the precautionary motive for corporate cash holding.

Original languageEnglish
Article number101458
Number of pages17
JournalInternational Review of Financial Analysis
Volume68
DOIs
Publication statusPublished - 1 Mar 2020

Keywords

  • Cash holdings
  • Organization capital

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