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Cash Holdings and Corporate Transparency: An International Perspective
Yan Zhang,
State University of New York at Binghamton
Pinghsun Huang, Massey University
ABSTRACT. We use recent data on firm-level transparency and disclosure ratings around the globe to examine the effect of corporate transparency on both the level and the value of cash holdings. In a sample of 951 firms from 38 countries, we find that a firm’s holdings of liquid assets decrease with the level of corporate transparency. We also report that cash resources are rewarded with higher market valuation when greater disclosure improves a firm’s transparency. Our findings show that enhanced transparency, achieved through greater disclosure, improves external monitoring and thus limits insiders’ ability to accumulate cash to expropriate minority shareholders.
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