| Περίληψη: | The present thesis discusses three contemporary research topics in financial accounting and corporate finance.
The first part of this doctoral thesis investigates the association between cash holdings and business strategy for non-financial and non-utility U.S. firms. The motivation for this research work stems from the critical implications for financial management, given the strategic effects of cash holdings. The study operationalizes Miles and Snow’s (1978, 2003) theoretical background and follows Bentley et al. (2013) to construct the relevant business strategy index. Through this process, two extreme business strategies are distinguished based on a firm’s resource allocation and investment behavior patterns, namely “Prospectors” and “Defenders”. The panel consists of 108,956 firm-year observations from 1974 to 2016. Following the model of Bates et al. (2009), this work employs multiple regression analysis to explore the relationship between business strategy and corporate cash holdings. The empirical results suggest that firm-level business strategy is positively related to cash holdings; thus, Prospectors are more likely to hold higher cash reserves than Defenders. Further, findings suggest that cash holding’s adjustment speed (SOA) is slower for Prospectors than for Defenders, implying that business strategy considerably influences the cash holding trend. Notably, the empirical results demonstrate that the market value of cash increases significantly only for the firms that pursue a defender strategy.
The findings of this work have valuable implications for researchers by unveiling the relationship between corporate strategy and firms’ cash holdings. Specifically, the findings could be useful to financial managers and investment strategists who seek to maximize firm value through the adoption of an effective liquidity policy. What is more, the study provides support for the view that strategic choice and optimal cash management are of great importance for firms’ market value. Also, this study enriches the knowledge of business strategy’s impact on the financing policy of firms and contributes to the empirical literature on cash holdings’ determinants. In addition, it complements previous studies on U.S. firms by documenting the effect of business strategy on the speed of adjustment (SOA) in cash holdings and firm value.
The second part of this doctoral thesis considers the relationship between the chief executive officer's ability and liquidity policy. Motivated by the ongoing debate concerning cash holding costs and benefits, this study attempts to evaluate management's influence on related corporate decisions. The final panel consists of 124,550 firm-year observations from U.S. incorporated firms between 1980 and 2016. The main research question is examined via fixed-effects ordinary least squares (OLS) regression analysis. Consistent with the upper echelon theory and cash holding motives, the results reveal that talented chief executive officers (CEOs) are associated with increased cash stockpiling, ceteris paribus. Further analysis shows that the relationship between CEO ability and firm cash holding is more profound for financially sound firms. In addition, firm size is likely to affect significantly the association between CEO ability and cash management. The results are robust to various sensitivity analyses and additional tests, such as GMM estimator, Granger causality test, and alternative proxies of CEO ability and cash holdings.
After a thorough study of the relevant literature in the field, it emerged that, to date, there is no clear consensus about the extent to which managerial ability explains the level of corporate cash. Hence, the study provides new evidence that CEO ability is a contingent factor of corporate cash stock by empirically showing that skillful CEOs are perceived to increase corporate cash levels. The insights derived from the study are expected to advance the decision-making process of cash policies or CEO selection for business executives, investment strategists, and shareholders. Although this work is subject to limitations inherent in the use of relevant proxies, the study implements several model specifications to ensure the validity of findings in a more generic context.
The third part of this doctoral thesis examines the impact of corruption on firm performance, considering the interventional role of cash holdings in the emerging market of Greece. The study is mainly motivated by the high rate of corruption in Greece, traditionally ranked as one of the most corrupt nations in the EU and Western Europe. The study utilizes a sample of 142,079 firm-year observations between 2006 and 2014. Descriptive statistics, multiple regression analyses, and various robustness checks are employed to test the empirical hypotheses. The results show that firm performance is positively related to the control of institutional corruption, implying that firms perform better when operating in a low-corruption environment. Moreover, all other things being equal, findings reveal that a firm’s cash holding strengthens the positive association between control of corruption and corporate financial performance.
This research study takes a more holistic approach by considering institutional factors in conjunction with corporate financial policies and outcomes. The article illustrates how firm-level mechanisms can preclude political rent-seeking to improve corporate performance in a pervasive corrupt environment. The study's main limitation is that it focuses exclusively on a single country setting, based on the extreme-critical case's logic. Nevertheless, the findings might be helpful for business executives and regulators when implementing firms’ asset allocation strategies and anti-corruption policies. Last but not least, the study augments the relevant literature on the firm-level implications of corruption by providing new evidence for the interventional role of cash management in the context of an emerging economy.
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