Corporate cash holdings in an emerging market: the case of India

This thesis contributes to the literature on corporate cash holdings. The aim of the thesis is to shed light on the precautionary and agency motives of Indian firms’ cash holdings in their transition to integrating with the world economy. Three elements of India’s capital market transitioning phase are empirically investigated with respect to firms’ cash holdings and related financial policies. The first chapter of the thesis is concerned with the increasing presence of foreign institutional investors in Indian capital markets. It investigates whether and how foreign institutional ownership restricts the ability of corporate insiders to derive private benefits from firms’ cash holdings. This work contributes to the literature which studies corporate governance advancements in emerging markets. The second chapter of the thesis examines Indian firms’ sources of funds conducive to cash holdings. It investigates to what extent firms issue outside finance in order to save proceeds as cash. This work contributes to the literature which studies firms’ liquidity management under uncertain financing conditions. The final chapter of the thesis examines India’s capital market institutions. It investigates whether and how deepening domestic capital markets can relieve firm-level financial constraints. This work contributes to the literature which studies firm investment and growth in the context of developing market institutions. Collectively, these chapters examine the evolution of firm-level outcomes, including cash holdings, investment and firm values in the context of an emerging economy undergoing significant changes in its institutional architecture

Corporate cash holdings: causes and consequences

The considerable growth in corporate cash holdings around the world has prompted scholarly interest. Consequently, there is now a large academic literature examining cash holdings and their impact on corporate outcomes and firm values. This article reviews and synthesizes the literature to offer insight into two primary motives to hold cash: precautionary and agency. We first present a stylized model that explores the trade-off in holding cash between these two motives and then examine empirical studies to determine how existing theories are supported by evidence using data from a variety of countries. In addition, we examine the effectiveness of a variety of corporate governance devices in curtailing cash holdings and also the extent to which these devices offer investors' confidence that cash will not be wasted. Finally, we discuss methodological and measurement issues associated with empirical cash holdings studies

Corporate cash holdings in an emerging market: the case of India

This thesis contributes to the literature on corporate cash holdings. The aim of the thesis is to shed light on the precautionary and agency motives of Indian firms’ cash holdings in their transition to integrating with the world economy. Three elements of India’s capital market transitioning phase are empirically investigated with respect to firms’ cash holdings and related financial policies. The first chapter of the thesis is concerned with the increasing presence of foreign institutional investors in Indian capital markets. It investigates whether and how foreign institutional ownership restricts the ability of corporate insiders to derive private benefits from firms’ cash holdings. This work contributes to the literature which studies corporate governance advancements in emerging markets. The second chapter of the thesis examines Indian firms’ sources of funds conducive to cash holdings. It investigates to what extent firms issue outside finance in order to save proceeds as cash. This work contributes to the literature which studies firms’ liquidity management under uncertain financing conditions. The final chapter of the thesis examines India’s capital market institutions. It investigates whether and how deepening domestic capital markets can relieve firm-level financial constraints. This work contributes to the literature which studies firm investment and growth in the context of developing market institutions. Collectively, these chapters examine the evolution of firm-level outcomes, including cash holdings, investment and firm values in the context of an emerging economy undergoing significant changes in its institutional architecture