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Cash holdings around the world: The Financial crisis, culture and shareholder rights.

Alves, Paulo (2018): Cash holdings around the world: The Financial crisis, culture and shareholder rights.

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Abstract

The goal of this paper is to study how cash holdings were affected by the 2008 financial crisis. Our results suggest that the 2008 financial crisis had a negative impact on cash holdings. However, the impact depends on the post crisis period. Although from 2008 to 2014 the impact was negative, from 2009 to 2010, the impact was positive. This result shows that after the crisis, firms did not need to hold cash to cover eventual shortfalls. Precautionary motives no longer can hold as the main explanatory theory, which brings about another hypothesis, namely the agency hypothesis, for explaining firms’ cash holdings. We also have shown that in collectivistic countries, firms’ cash holdings present higher reductions, meaning that they tolerate higher levels of risk. We suspect that this is a result of the unprecedented values in terms of cash holdings until 2008.

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