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Accounting information quality and cash holdings—Moderating effects based on state ownerships and local appointments

Liangyu Zhu (Nankai University Business School, Tianjin, China) (School of Economics and Management, North China Electric Power University, Beijing, China)
Yulong Sun (Nankai University Business School, Tianjin, China) (China Academy of Corporate Governance, Nankai University, Tianjin, China)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 3 October 2023

241

Abstract

Purpose

The purpose of this study is to explore the continuity and stability of the impact of accounting information quality on cash holdings, and the moderating effect of this relationship on state ownerships and local appointments.

Design/methodology/approach

Based on China's companies from 2011 to 2019, the authors divided cross-section and panel samples, adopted a linear and classification model and performed grouping regression.

Findings

The authors find that: first, the quality of corporate accounting information can significantly improve the level of cash holding, giving play to the strategic value effect of cash holding. But that boost is based on economies being able to solve agency problems. Second, the reduction of earnings management and the improvement of accounting information quality of NSOEs improve the level of cash holdings, while SOEs are on the contrary. Third, local appointments can play to the emotional strengths of their hometowns and play a synergistic role in this relationship, but the supervision effect of remote appointments is not obvious.

Originality/value

Through endogeneity and other tests, the conclusion is robust. Based on the agency and information asymmetry theory, the authors considered China's institutional and cultural factors, optimized accounting information's measurement and expanded the research boundary of the accounting field. The authors believe that applicable scenarios should be fully considered in the concluding relationship between accounting information quality and cash holdings. Enterprises should give full play to the advantages of cash holdings in strategic decision-making and financial efficiency, improve the quality of accounting information and also consider state ownerships and the differences in directors' emotions to reduce internal agency costs.

Keywords

Acknowledgements

This work was supported by the Graduate Research and Innovation Projects of Tianjin [grant number 2021YJSB066].

Citation

Zhu, L. and Sun, Y. (2023), "Accounting information quality and cash holdings—Moderating effects based on state ownerships and local appointments", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-01-2022-0173

Publisher

:

Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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