The authors would like to thank Chih-Liang Liu, Fu-Ru Yang, Tzu-pu Chang and seminar participants at 2010 the 18th Annual Conference on PBFEAM and 2011 European Financial Management Association Annual Meetings in Braga for helpful comments and suggestions.
Excess cash holdings and investment: the moderating roles of financial constraints and managerial entrenchment
Version of Record online: 24 AUG 2012
© 2012 AFAANZ
Accounting & Finance
Volume 52, Issue Supplement s1, pages 287–310, October 2012
How to Cite
Sheu, H.-J. and Lee, S.-Y. (2012), Excess cash holdings and investment: the moderating roles of financial constraints and managerial entrenchment. Accounting & Finance, 52: 287–310. doi: 10.1111/j.1467-629X.2012.00500.x
- Issue online: 5 OCT 2012
- Version of Record online: 24 AUG 2012
- Received 4 December 2010; accepted 17 September 2011 by Robert Faff (Editor).
- Excess cash;
- Financial constraints;
- Managerial entrenchment;
Our study investigates the relationship between excess cash holdings and investment behaviour under two dimensions of financial constraints and managerial entrenchment, based upon a sample of Taiwanese firms operating in an environment characterized by poor legal protection for investors, with data covering the years 2000–2006. We find that excess cash is significantly correlated with capital expenditure, particularly for firms financially constrained and with severe managerial entrenchment. However, the evidence shows that excess cash is insensitive to R&D expenditure under these two dimensions.