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The purpose of this study is to examine whether audit quality influences auditees' liquidity policy.

The author uses ordinary least squares (OLS) estimators, and we focus on a panel of US publicly traded companies (36,118 company-year observations) over the period of 2004–2019 to examine the effect of audit quality on auditees' cash reserves.

The author finds that high quality audits are negatively related to auditees' cash reserves. Additional analyses show that the potential channel by which audit quality influences these reserves is financial constraints (FC). Particularly, his results suggest that an auditee's FC serve as an intermediary in the association between audit quality and auditee's cash reserves. Ultimately, we show that high quality audits raise the market value relevance of an extra dollar in cash reserves.

By linking two distinct research lines of audit quality and corporate cash reserves, this study adds to both lines of literature, as it is a novel one (to the best of the author’s knowledge) to provide evidence about the effect of audit quality on the auditees' liquidity policy (a real economic decision and internal financial policy) that ultimately boosts the auditees' investment efficiency. The author’s findings are consistent with influential monitoring and an insurance-like function of high quality audits in reducing information asymmetry and its consequences. His results also support the argument that auditees' transparency through high quality audits can be a pivotal determinant of their liquidity policy.

The purpose of this paper is to examine how investors’ valuation of cash holdings is related to firm-level investment.

As prior studies note that holding excess cash serve as a driver to would be over-investing, and that over-investment imposes substantial agency costs on shareholders, the authors focus on the value implications of holding cash in the presence of over-investment from the perspective of shareholders.

By examining the publicly traded companies on Taiwan stock market, the authors uncover that cash is valued less in firms with over-investment than in those with under-investment and the magnitude of over-investment is negatively related to the marginal value of cash holdings (MVCH). It reveals that investment activities impact the value that shareholders place on cash holdings. Moreover, further tests indicate that higher block holdings and the presence of independent directors on boards can effectively mitigate the negative impact of over-investment on the MVCH.

This paper enhances the understanding of the valuation implications of cash reserves held by firms with over-investment and the effectiveness of governance structures in containing the detrimental effect of investment-related agency costs on the value of holding cash.

This paper provides pioneering evidence that outside investors discount cash assets in over-investing firms to reflect their expectations that they will not receive the full benefit of these assets; and this paper extends the literature on corporate governance by assessing the role of governance mechanisms in reversing the negative relation between over-investment and the MVCH.

The purpose of this paper is to provide evidence on how firm-specific and macroeconomic uncertainty affects shareholders’ valuation of a firm’s cash holdings. This extends previous work on this issue by highlighting the importance of the source of uncertainty. The findings indicate that increases in firm-specific risk generally increase the value of cash while increases in macroeconomic risk generally decrease the value of cash. These findings are robust to alternative definitions of the unexpected change in cash. The authors extend the analysis to financially constrained and unconstrained firms.

The authors test the hypothesis that the marginal effect of cash holdings on excess stock returns is sensitive to uncertainty. To compute this marginal effect, the authors adopt and extend the approach of Faulkender and Wang (2006) to the authors’ more elaborate model.

The findings indicate that different sources of uncertainty affect the value of cash holdings differently. Findings indicate that increases in firm-specific risk generally increase the value of cash while increases in macroeconomic risk generally decrease the value of cash. These findings are robust to alternative definitions of the unexpected change in cash. The authors also extend the findings to financially constrained and unconstrained firms.

The findings indicate that the source of uncertainty firm-specific vs macroeconomic risk matters. The two sources of risk may have quite different effects on shareholders’ valuation of a firm’s cash holdings. Results from alternative sources of findings are new. These new findings are robust to alternative definitions of the unexpected change in cash.

Many companies have either rejected or reduced the size of risk management (hedging) programs because they do not believe that the market will reward them sufficiently for the reduction in earnings volatility. In fact, many commodity companies would take the argument a step farther and argue that the market will punish them for reducing their commodity exposure.

The purpose of this paper is to explore the advantages equity capitalization programs based on retained earnings from patronage sources may provide cooperatives and their patrons that traditional equity financing methods do not offer.

The analysis is based on a model used to assess patron benefits from a cooperative that is financed by a combination of allocated equity acquired from noncash patronage refunds and unallocated equity acquired from retained earnings. The level of patron benefits is represented by the present value of the after-tax cash flow patrons receive from the cooperative, and the model is used to determine the combination of noncash patronage refunds and retained earnings that provides the greatest present value given the levels of those parameters that affect capitalization of the cooperative and the distribution of cash benefits to patrons.

The analysis demonstrates that only pure plans, i.e., plans based entirely on retained patronage refunds or entirely on retained earnings, will be associated with the greatest present value for any particular set of parameter values. Cooperatives that are characterized by low marginal tax rates and growth rates and whose patrons are characterized by high marginal tax rates and discount rates are those most likely to benefit from equity capitalization programs based on retained earnings.

The model is based on the assumption of constant parameter values and does not account for the existence of nonpatronage income.

A useful extension of this work would be the development of a decision aid capable of generating basic operating statement and balance sheet data and enabling cooperative decision makers to conduct experiments concerning alternative financing strategies based on retained earnings.

The analysis contained in this paper is based on an explicit model and extends across a broad range of values for various parameters that affect the level, timing, and present value of cash distributions from cooperatives. Because the cash flow received by patrons is determined after the cooperative’s planned equity growth is met, cash flow comparisons are equivalent with respect to the capital provided the cooperative. In addition, the revolving period is endogenously determined.

Sees the objective of teaching financial management to be to help managers and potential managers to make sensible investment and financing decisions. Acknowledges that financial theory teaches that investment and financing decisions should be based on cash flow and risk. Provides information on payback period; return on capital employed, earnings per share effect, working capital, profit planning, standard costing, financial statement planning and ratio analysis. Seeks to combine the practical rules of thumb of the traditionalists with the ideas of the financial theorists to form a balanced approach to practical financial management for MBA students, financial managers and undergraduates.

This study aims to provide a review of corporate governance and cash holdings because strong corporate governance is necessary for the efficient utilization of firm’s liquid resources such as cash, to minimize the agency cost of high cash holdings and to improve the value of cash.

The authors provide a literature review of corporate governance and cash holdings through a conceptual and theoretical argument rather than empirical research.

The authors review an empirical and theoretical work surrounding key corporate governance variables and identify avenues for future research. The authors find that corporate governance mechanisms and cash holdings have received much attention during the past two decades. However, the significant role of corporate governance (both country-level and the firm-level) in controlling the entrenched behaviour of the managers is discussed separately in the literature. The combined effect of both country-level and the firm-level governance is lacking in the cash holdings literature. Additionally, this study has found that much attention is paid to the developed markets, while only a few focused on the developing markets regarding cash holding literature, although the agency problems are high in developing markets.

The study contributes to the growing literature on corporate governance and cash holdings and provides a further understanding of the role of governance in minimizing the agency cost to increase value by assuring that firms’ assets are used efficiently and productively in the best interests of investors and other stakeholders. In addition, it provides a new idea to the policymaker and future researchers where they need to do more work.

The purpose of the present study is to discuss the combined effect of predation risk and firms' market power on cash holdings.

The authors tested hypotheses by using consolidated financial data in Japanese firms.

The authors find that firms' cash holdings increase with a rise in predation risk faced by firms. However, the higher the firm's market power, the weaker the above interplay becomes. Moreover, the authors find that even when firms' investments are decreased at the industry level, firms with larger cash holdings seek to mitigate predation risk by funding strategic investments with the potential to steal rivals' market share.

The authors recognize the importance of a firm's market power. Take a firm's market power into consideration to analyze the mechanism of a firm's cash holdings, there is a possibility that the mechanism of a firm's cash holdings as presented by the previous studies will be changed.

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual realities and the future, potential, best possible conditions of general stable equilibrium which both pure and practical reason, exhaustive in the Kantian sense, show as being within the realm of potential realities beyond any doubt. The first classical revolution in economic thinking, included in factor “P” of the equation, conceived the economic and financial problems in terms of a model of ideal conditions of stable equilibrium but neglected the full consideration of the existing, actual conditions. That is the main reason why, in the end, it failed. The second modern revolution, included in factor “A” of the equation, conceived the economic and financial problems in terms of the existing, actual conditions, usually in disequilibrium or unstable equilibrium (in case of stagnation) and neglected the sense of right direction expressed in factor “P” or the realization of general, stable equilibrium. That is the main reason why the modern revolution failed in the past and is failing in front of our eyes in the present. The equation of unified knowledge, perceived as a sui generis synthesis between classical and modern thinking has been applied rigorously and systematically in writing the enclosed American‐British economic, monetary, financial and social stabilization plans. In the final analysis, a new economic philosophy, based on a synthesis between classical and modern thinking, called here the new economics of unified knowledge, is applied to solve the malaise of the twentieth century which resulted from a confusion between thinking in terms of stable equilibrium on the one hand and disequilibrium or unstable equilibrium on the other.