Cash Holdings Adjustment Speed and Managerial Ability Articles uri icon

authors

  • CHO, HYUNGJIN
  • CHO, SERA
  • Kim, Mi-Ok

publication date

  • October 2018

start page

  • 695

end page

  • 719

issue

  • 5

volume

  • 47

International Standard Serial Number (ISSN)

  • 2041-9945

Electronic International Standard Serial Number (EISSN)

  • 2041-6156

abstract

  • Using the partial adjustment model of cash holding, we find that managerial ability is negatively related to adjustment speed of cash holdings toward the target, particularly when the firm has excess cash. We also find that the relation between managerial ability and cash holding adjustment speed is weaker in the presence of the internal capital market. Additionally, we provide evidence that firms with higher managerial ability are less likely to make inefficient investments when they have excess cash, implying that high-ability managers are willing to hold a large amount of cash to make timely investments.

keywords

  • cash holdings; internal capital market; investment efficiency; managerial ability; partial adjustment model; internal capital-markets; business groups; management quality; ceo reputation; determinants; firms