Does employees' interest matter more than shareholders' interest in determining cash management policy?
Date
2023
Authors
Gupta, K.
Krishnamurti, C.
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International Review of Economics and Finance, 2023; 84:568-589
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Abstract
Extant literature suggests that firms that follow good corporate governance (CG) practices maintain lower cash holdings. Another strand of literature suggests that employee-friendly firms maintain higher cash holdings. The negative relationship between CG practices and cash holding, and the positive relationship between employee-friendly practices and cash holding raises question as to whether firms should undertake shareholder or stakeholder-friendly policies. Our study finds that the cash holdings are negatively related to employee-friendly practices. We also find that good CG practices are negatively related to cash holdings. Cross-country evidence suggests that employee-friendly firms affect cash holdings primarily when countries follow strong labour laws and regulations, suggesting that benefits provided at the country-level complement the benefits provided by the firm.
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Copyright 2022 Elsevier