Corporate Cash Holdings and Political Connections

Authors

Matthew D. Hill, University of MississippiFollow
Kathleen P. Fuller, University of MississippiFollow
G. Wayne Kelly, University of Southern MississippiFollow
Jim O. Washam, Arkansas State University

Document Type

Article

Publication Date

1-1-2014

School

Finance

Abstract

We examine the relation between corporate liquidity and political connections measured via lobbying expenditures. This is an interesting question as many of the motives for holding cash should be diminished by political connections. Results indicate a significant and inverse relation between cash levels and lobby expenses and that the marginal value of cash decreases with lobbying. Taken together, these findings suggest firms react optimally to the reduced benefits of cash linked to political connections and that the market recognizes the weakened benefits of cash. Overall, our research shows another way political connections can shape corporate policy. © 2012 Springer Science+Business Media New York.

Publication Title

Review of Quantitative Finance and Accounting

Volume

42

Issue

1

First Page

123

Last Page

142

Recommended Citation

Hill, M., Fuller, K., Kelly, G., Washam, J. (2014). Corporate Cash Holdings and Political Connections. Review of Quantitative Finance and Accounting, 42(1), 123-142.
Available at: https://aquila.usm.edu/fac_pubs/20257