Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia
by Qian Long Kweh; Irene Wei Kiong Ting; Noor Azlinna Azizan; Norazlin Ahmad
International Journal of Business Excellence (IJBEX), Vol. 24, No. 1, 2021

Abstract: This study examined the association between political connections and corporate cash holdings, with a focus on financially-constrained firms. Using a unique dataset of the top 500 publicly listed firms in Malaysia as determined by market capitalisation for the years 2001-2004, this study measured political connections based on informal ties and government supports. The empirical results of this study show that firms with financial constraints have a lower level of cash holdings, while politically connected firms hold more cash. However, politically connected firms with financial constraints hold more cash. Taken together, this study shows that financially constrained firms are relatively conservative in their cash holdings when they are politically connected even though they are generally perceived as risky by investors, consistent with precautionary motives. The outcome of this study should prove useful in assessing the potential economic consequences to the business environment of politically connected firms, especially in shaping corporate policy.

Online publication date: Tue, 01-Jun-2021

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Business Excellence (IJBEX):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com