Journal of Financial and Quantitative Analysis Vol. 52 No. 4 2017
Tournament-Based Incentives, Corporate Cash Holdings, and the Value of Cash
Abstract
This research examines the relations between tournament-based incentives and corporate cash holdings and the value of cash. We find robust evidence that tournament-based incentives are positively related to cash holdings and the value of cash. Moreover, the effect of tournament-based incentives on the value of cash is stronger for financially constrained firms. Our evidence indicates that as tournament-based incentives motivate riskier corporate policy choices that lead to not only larger expected shareholder value but also greater cash-flow uncertainty, firms increase cash holdings to cushion potential liquidity shortfalls that may cause underinvestment.
- DOI
- 10.1017/s0022109017000503
- Volume
- 52
- Issue
- 4
- Pages
- 1519-1550
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref