Abstract
This paper finds that investors evaluate cash holdings differently based on the source of cash flows. Using cash flows from related-party sales as a proxy for diverse sources, we find that shareholders discount the value of cash holdings for firms with higher cash flows from related-party sales. We find that firms use related-party sales cash flows differently; cash flows from related-party sales are more likely to be retained as internal cash reserves or distributed as dividends, rather than utilised for necessary investments. We further document a negative valuation of investments for firms with more related-party sales.
Original language | English |
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Pages (from-to) | 2915-2948 |
Number of pages | 34 |
Journal | Accounting and Finance |
Volume | 64 |
Issue number | 3 |
DOIs | |
State | Published - Sep 2024 |
Keywords
- corporate governance
- market value of cash holdings
- related-party transactions
- resource allocation
- source of cash flows