AbstractsBusiness Management & Administration

Agency Conflicts and the Cash Flow Sensitivity of Cash in Australia

by Jonathan Mitchell Skeggs




Institution: University of Otago
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


Abstract

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.