Regulatory influence on corporate cash holdings: Minority shareholder activism by regulators

IF 7.5 1区经济学 Q1 BUSINESS, FINANCE

International Review of Financial Analysis Pub Date : 2025-03-11 DOI:10.1016/j.irfa.2025.104105

Rongrong Chen , Xiaomeng Charlene Chen

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引用次数: 0

Abstract

Focusing on an exogenous shock to minority investor activism, we investigate the effect of the China Securities Investor Services Center (CSISC), a minority shareholder protection mechanism introduced by the China Securities Regulatory Commission, on corporate cash holdings. Using a firm-quarter sample of Chinese listed companies from 2015 to 2017, we find that firms increased their cash holdings after CSISC became a minority shareholder. Channel tests and estimates of the cash flow sensitivity of cash reveal that this increase is primarily driven by precautionary motives, as firms prepare for potential financial uncertainties under CSISC's oversight. We further explore the role of governance-related factors—internal control quality, institutional ownership, and analyst coverage—and find that while CSISC's involvement strengthens governance by mitigating agency motives, it maintains a strong precautionary basis for increased cash holdings in response to heightened regulatory monitoring. This research highlights CSISC's critical role in influencing corporate liquidity management and enhancing investor protection in emerging markets.

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来源期刊

International Review of Financial Analysis BUSINESS, FINANCE-

CiteScore

10.30

自引率

9.80%

发文量

366

期刊介绍： The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.