Cash holdings in family firms: CEO identity and implications for firm value

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3 Citations (Scopus)

Abstract

We investigate the cash holdings policy of family firms and examine potential value implications. Family firms hold more cash than other firms, with an average difference of 2.3% of total assets. This result is driven by firms managed by heir CEOs. While the cash holdings policy of first‐generation family firms is more sensitive to firm risk, consistent with founders’ increased risk aversion, that of later‐generation firms is more sensitive to information asymmetry and agency conflicts. Heir CEOs’ cash policies destroy value, as the marginal value of an additional Euro suffers from a 38.3‐cent discount, on average, relative to non‐family firms.
Original languageEnglish
Pages (from-to)386-415
Number of pages30
JournalEuropean Financial Management
Volume26
DOIs
Publication statusPublished - 2020

Keywords

  • cash holdings, family firms, family generation, value of cash

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