Agency Conflicts and the Cash Flow Sensitivity of Cash in Australia
Institution: | University of Otago |
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Department: | |
Year: | 0 |
Keywords: | Cash; Cash Flow; Sensitivity; Agency Costs; Asymmetric Information; Financial Constraint; Liquidity Management; Corporate Governance; Financial Distress; Industry; Mining; Cleary Index; Corporate Policy |
Record ID: | 1307343 |
Full text PDF: | http://hdl.handle.net/10523/5454 |
This thesis investigates the primary influences of cross-sectional variation in the cash flow sensitivity of cash in Australian firms over the period 1994-2013. Financial constraints are found to significantly increase the sensitivity of a firm’s cash holdings to internally generated cash flows. The role of corporate governance is examined and agency conflicts are identified to have a significant influence on liquidity management. I provide evidence in favour of the costly contracting hypothesis impacting poorly governed firm’s liquidity policy. Alternative influences, such as industry and financial distress are also shown to explain cross-sectional variation in liquidity management. Ultimately, I find that liquidity policy is not purely driven by a firm’s financial constraint, but however a collective mix of several influences on firm behaviour.