Creditor Rights, Country Governance, and Corporate Cash Holdings

Arbeitspapier

This study examines the impact of creditor rights on cash holdings using a sample of firms from 48 countries. We argue that creditor rights affect the willingness of lenders to provide credit, which in turn affects the need for internal liquidity and cash holdings. Consistent with this, we find that corporate cash holdings decline with the strength of creditor rights. We also find that this relation depends on the quality of country governance. Among well-governed countries, firms hold less cash as creditor rights strengthen. In contrast, cash holdings increase with creditor rights in poorly governed countries. In these countries, it appears that the fear of expropriation motivates creditors with stronger rights to require higher levels of cash holding by borrowers.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 1214

Classification and Topics

• Classification: Wirtschaft ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; International Financial Markets
• Subject: Corporate governance ; Cash levels ; Creditor rights ; International markets ; Corporate Governance ; Betriebliche Liquidität ; Kreditsicherung ; Sachenrecht ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Seifert, Bruce ; Faleye, Olubunmi ; Gonenc, Halit
• Event: Veröffentlichung
• (who): Koç University-TÜSİAD Economic Research Forum (ERF)
• (where): Istanbul
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/108600
• Last update: 10.03.2025, 11:43 AM CET