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    Social capital and corporate cash holdings

    Access Status
    Fulltext not available
    Authors
    Habib, A.
    Hasan, Mostafa
    Date
    2017
    Type
    Journal Article
    
    Metadata
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    Citation
    Habib, A. and Hasan, M. 2017. Social capital and corporate cash holdings. International Review of Economics and Finance. 52: pp. 1-20.
    Source Title
    International Review of Economics and Finance
    DOI
    10.1016/j.iref.2017.09.005
    ISSN
    1059-0560
    School
    Department of Finance and Banking
    URI
    http://hdl.handle.net/20.500.11937/57686
    Collection
    • Curtin Research Publications
    Abstract

    © 2017 Elsevier Inc. In this paper we investigate the impact of regional social capital on corporate cash holdings. We also examine the possible channels through which social capital may affect cash holdings. Using US data, this study shows that firms from a high social capital county hold significantly less cash than firms from a low social capital county. We also confirm that social capital reduces cash holdings via the financial constraints and financial reporting quality channels, while it increases cash holdings via the systematic and idiosyncratic risk channels. Additional analysis reveals that, the effect of social capital on cash holdings is more pronounced for less geographically dispersed firms. These results are robust to alternative specifications of cash holdings and social capital, and to the use of a two-stage least squares (2SLS) analysis to alleviate the endogeneity concern. Overall, our findings suggest that regional social capital plays an important role in determining corporate cash holdings.

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