Journal of Finance Vol. 59 No. 5 2004
Cash and Corporate Control
Abstract
The takeover market is often suggested as appropriate for containing the agency problems of excessive corporate cash holdings. However, recent studies report contradictory evidence. I focus on the takeover‐deterrence effects of corporate liquidity and suggest the proxy contest as an effective alternative control mechanism. I find that proxy fight targets hold 23% more cash than comparable firms, and that the probability of a contest is significantly increasing in excess cash holdings. Proxy fight announcement return also is positively related to excess cash. Following a contest, executive turnover and special cash distributions to shareholders increase, while cash holdings significantly decline.
- DOI
- 10.1111/j.1540-6261.2004.00691.x
- Volume
- 59
- Issue
- 5
- Pages
- 2041-2060
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref