Corporate cash holdings have a significantly positive impact on executive compensation, distinct from the well-documented
relation between performance and compensation. An increase of cash holdings by 10% of assets corresponds to about $2.7 million additional
CEO total compensation. This relation is driven primarily by discretionary compensation components such as bonus and option-based
compensation. In companies with weaker governance, the relation between cash holdings and executive compensation is even stronger. Using
awards and losses associated with corporate litigation as exogenous shocks to the firms' cash, I show that CEO compensation readily
responds to these changes in cash holdings. Prior studies postulate that the optimal level of firms' cash holding is dynamic and, thereby,
managers should actively adjust cash holdings. I find that the more volatile a firm's cash holdings, the higher its firm value. The
correlation is more pronounced in smaller firms, younger firms, and firms in high tech industries. The findings are robust when
controlling for the level of cash holdings and cash flow volatility, among other factors. The positive connection between cash holdings
volatility and firm value is consistent with the need for active management of cash. Specialized managers who actively adjust the amount
of cash holdings help enhance the firm value more than generalist managers, consistent with the idea that specialized management has a
better understanding of the firm's cash needs. / A Dissertation submitted to the Department of Finance in partial fulfillment of the requirements for
the degree of Doctor of Philosophy. / Spring Semester 2016. / February 19, 2016. / Includes bibliographical references. / Yingmei Cheng, Professor Directing Dissertation; Thomas Zuehlke, University Representative; Irena
Hutton, Committee Member; Baixiao Liu, Committee Member.
| Identifer | oai:union.ndltd.org:fsu.edu/oai:fsu.digital.flvc.org:fsu_360442 |
| Contributors | Shipe, Stephan (authoraut), Cheng, Yingmei (professor directing dissertation), Zuehlke, Thomas W. (Thomas William) (university representative), Hutton, Irena (committee member), Liu, Baixiao (committee member), Florida State University (degree granting institution), College of Business (degree granting college), Department of Finance (degree granting department) |
| Publisher | Florida State University, Florida State University |
| Source Sets | Florida State University |
| Language | English, English |
| Detected Language | English |
| Type | Text, text |
| Format | 1 online resource (84 pages), computer, application/pdf |
| Rights | This Item is protected by copyright and/or related rights. You are free to use this Item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s). The copyright in theses and dissertations completed at Florida State University is held by the students who author them. |
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