We show that socially responsible firms use cash as a commitment device to honor implicit commitments to stakeholders. Firms with better social performance hold higher cash balances, especially for firms with social performance related to stakeholders or requiring cash spending. This relation is also stronger for firms that benefit more from social performance, e.g., firms that face more competition in product and labor markets. Social performance related to stakeholders or requiring cash spending increases the marginal value of cash.

This study explores the influence of chief executive officer (CEO) overconfidence on acquirer bondholder wealth in mergers from 1994 to 2019. We find that CEO overconfidence benefits acquirer bondholders. Overconfident CEOs are likely to choose targets with lower return correlations rather than targets with lower risk than acquirers. We further show there is a positive wealth effect during announcement periods as well as firm risk reduction and a positive long-run bond market reaction subsequent to merger completion when overconfident acquirers merge with targets that are less correlated. Overall, the coinsurance effect dominates the liquidity effect on overconfident acquirer bondholder wealth during a merger.