financial leadership'
ETHICAL
C O N D U C T
WHAT FINANCIAL EXECUTIVES
Do To LEAD
BY FREDERICK MILITELLO AND MICHAEL SCHWALBERG
T
oday's so-called "crisis" of
accountability or financial
integrity has been met with a
flurry of laws and regulations
designed to restore public confidence
in corporations. Likewise, many
financial institutions and some corpo-
rations seem to be trying to outdo one
another in announcing new policies
demonstrating their commitment to
integrity and ethical behavior.
Yet, a new Executive Report by the
Financial Executives Research Founda-
tion finds that the vast majority of cor-
porations and financial executives
express strong beliefs that ethical
behavior and financial integrity
remain the rule of the day. Rather than
believing that investor confidence can
be restored by external regulation,
they see the importance of "staying
the course" and "walking the walk" as
both the ethical gatekeeper and con-
science of their organizations.
In the study, Integrity-Based Finan-
cial Leadership and Ethical Behavior: A
Professional Response to Meeting the
Challenges and Responsibilities, finan-
cial executives from a wide range of
companies openly share thoughts,
insights and practices that relate to
the "crisis" of financial integrity.
While the findings are vast, and at
times controversial, two ideal por-
traits of ethical behavior emerged; the
"Ethically Intelligent Financial Execu-
tive" (EIFE) and the "Ethically Intelli-
gent Finance Organization" (EIFO).
The Ethically Intelligent
Financial Executive
He or she is aware of the multiple
pressures that may potentially
impinge upon the maintenance of
X, /
one's integrity, and is further aware of
the ubiquitous presence of ethical
dilemmas faced by leaders in daily
business life, and takes the time to
reflect upon these dilemmas.
George Boyadjis, EVP, CFO and
Treasurer of American TeleCare Inc.,
speaks for many in the study when he
observes, "So much of what we do is
driven by the creation of value
through increasing the speed of busi-
ness — shortening time to market,
accelerating growth rates, cutting
cycle times, etc. But, if we as financial
executives are truly focused on value
creation for the enterprise, then we
must also reflect on the ethics and
transparency of transactions and rela-
tionships."
The EIFE is a valued business part-
ner who actively assists the business-
es in planning, development and
T w o IDEAL PORTRAITS OF ETHICAL BEHAVIOR EMERGED FROM A NEW
REPORT BY THE FINANCIAL EXECUTIVES RESEARCH FOUNDATION: THE
"ETHICALLY INTELLIGENT FINANCIAL EXECUTIVE" (EIFE) A N D THE
"ETHICAL INTELLIGENT FirviANCE ORGANIZATION" ( E I F O ) .
www.fei.org January/February 2003 49
Arnold l-ldnish,
Executive Director, Finance and Chief
Accounting Officer, Eli Lilly and Co.
George Boyadjis,
EVP, CFO and Treasurer,
American TeleCare Inc,
Gary L. Ellis,
VP, Corporate Controller and Treasurer,
Medtronic Inc.
implementation of projects and goals,
and as the c ...
Are CEO's an Unmanaged Risk to the Organisation's they Steer?David Mallard
Are leaders, and the cultures they spawn, an unmanaged risk to the enterprises they steer? Research shows not
only the costs of failure to pay attention to business ethics
costs but the financial benefits of a focus on business ethics. Board reliance on good compliance policies
can only signal intent. The Board’s critical role in building organisational integrity involves four key activities.
For effective governance, boards must set a stronger toneGrant Thornton LLP
The document discusses several key issues facing not-for-profit boards and governance in 2015. It states that boards must take a stronger role in fundraising and setting the tone for ethical standards and practices. Effective boards require strong leadership from both the board chair and CEO. Boards are also recognizing the importance of diversity and seeking members with a variety of skills and backgrounds. Taking ethics beyond basic compliance, boards must model high standards of conduct to set the right tone from the top down.
Corporate Governance: An Ethical PerspectivePeter Chambers
The document discusses several topics related to business ethics and governance:
1. It discusses failures of governance that contributed to the global financial crisis, including a lack of understanding of risk at board levels and remuneration strategies that encouraged inappropriate risk-taking.
2. It outlines some key drivers of ideas about ethical business practices, including OECD governance principles, statutes, governance codes and guidance, developments in practice, and stakeholder pressure.
3. It provides examples of governance codes and recommendations from reports that emphasize the importance of issues like diversity, accountability, transparency, and managing conflicts of interest.
The document discusses the importance of corporate culture in building an effective ethics and compliance program. It states that a culture of ethics and compliance is the foundation of a strong risk management program. It also notes that regulators now expect organizations to promote an ethical culture. The document provides guidance on establishing a culture of integrity, including defining organizational values around ethics, consistency of messaging from leadership, accountability, and rewarding ethical behavior. It acknowledges some challenges in defining, instilling, and maintaining a strong culture.
This document discusses the importance of strong character and ethics in leadership. It argues that character, defined as an individual's moral qualities, is the most inspiring trait in a leader. The core attributes that make up good leadership character are integrity, authenticity, the ability to listen, having a positive tone and outlook, emotional intelligence, confidence, and sharing a vision. For organizations to foster an ethical culture, leaders must think beyond short-term profits, address unethical behaviors promptly, and promote values of respect, honesty and integrity through their words and actions to encourage ethical decision-making.
The document discusses factors that differentiate good ethics and compliance programs from great ones. It outlines five key factors: tone at the top from the board and senior management, a culture of integrity, thorough risk assessments, robust testing and monitoring programs, and an effective chief ethics and compliance officer. When these factors are embedded in an organization's operations, it significantly improves its ability to protect itself from risks and strengthen relationships with stakeholders.
The document discusses factors that differentiate good ethics and compliance programs from great ones. It outlines five key factors: tone at the top from board and senior management, a culture of integrity, thorough risk assessments, robust testing and monitoring programs, and an effective chief ethics and compliance officer. When these factors are embedded in an organization's operations, it significantly improves its ability to protect itself from risks and strengthen relationships with stakeholders.
Ethics in AccountingKeys to Reducing FraudAbstra.docxhumphrieskalyn
Ethics in Accounting
Keys to Reducing Fraud
Abstract: The major problem facing accounting today is the ethical and moral decline of accounting professionals. The American Institute of Certified Public Accountants (AICPA) has published ethical rules to guide accounts and protect the trustworthiness of their decisions in the event an ethical dilemma arises. However today, the profession remains challenged with the need to invest in the growth and development of ethical and moral reasoning of accounting professionals to protect them from veering from ethical standards. This paper will explore ethical concepts such as professional conduct and integrity and how emphasis on these ethical values will affect fraud.
Table of Contents
I. Executive Summary 1
II. Introduction 1
III. Review of Literature 1
IV. Analysis 1
V. Recommendations 1
VI. Summary and Conclusions 1
VII. Appendix x 1
VIII. References 1
ACCT 601 – Accounting Capstone
Ethics in accounting
Page 0 of 3I. Executive Summary
Due week 7II. Introduction
Problem statement and how the topic fits with the course, the degree, and your focus area.
Include a reason for the audience to read the paper. Include an overview of what you are going to cover in your paper and the importance of the material.
Preview the main ideas and the order in which they will be covered.
Establish a tone of the document.
Accounting is the process by which financial transactions are monitored, tracked and examined. It aims to provide a means of determining the expenditure levels of an institution and it provides a means of maintaining transparency and honesty in the recording of business transactions. While most accounting is completed using technology, software is easily manipulated by people. Thus, individuals are the least reliable part of the process, as they are susceptible to influence from outside sources and defiant personal decisions. Therefore, the major problem facing accounting is the ethics and morals of the individual accountants. This paper will determine the importance of specific aspects, such as autonomy, confidentiality, professional conduct and integrity and establish the overall ethical characteristic necessary to ensure proper accounting and inhibit fraud.
Autonomy
According to Kant's moral philosophy, autonomy is the capacity of an individual to act based on objective morality rather than personal desires or other influences. In accounting, managers make decisions on their own without the input or approval of higher authorities. In some cases, this self-rule or individuality may affect decisions made due to pressures of the moment rather than the right decisions for the company. In other words, singular decisions made with the aim of bias in the outcome in favour of either a party involved in the process or the decision maker rather than for the greater good is in itself corrupt. Therefore, to ensure decisions are made with the best intentions of the organization, rather than othe.
Are CEO's an Unmanaged Risk to the Organisation's they Steer?David Mallard
Are leaders, and the cultures they spawn, an unmanaged risk to the enterprises they steer? Research shows not
only the costs of failure to pay attention to business ethics
costs but the financial benefits of a focus on business ethics. Board reliance on good compliance policies
can only signal intent. The Board’s critical role in building organisational integrity involves four key activities.
For effective governance, boards must set a stronger toneGrant Thornton LLP
The document discusses several key issues facing not-for-profit boards and governance in 2015. It states that boards must take a stronger role in fundraising and setting the tone for ethical standards and practices. Effective boards require strong leadership from both the board chair and CEO. Boards are also recognizing the importance of diversity and seeking members with a variety of skills and backgrounds. Taking ethics beyond basic compliance, boards must model high standards of conduct to set the right tone from the top down.
Corporate Governance: An Ethical PerspectivePeter Chambers
The document discusses several topics related to business ethics and governance:
1. It discusses failures of governance that contributed to the global financial crisis, including a lack of understanding of risk at board levels and remuneration strategies that encouraged inappropriate risk-taking.
2. It outlines some key drivers of ideas about ethical business practices, including OECD governance principles, statutes, governance codes and guidance, developments in practice, and stakeholder pressure.
3. It provides examples of governance codes and recommendations from reports that emphasize the importance of issues like diversity, accountability, transparency, and managing conflicts of interest.
The document discusses the importance of corporate culture in building an effective ethics and compliance program. It states that a culture of ethics and compliance is the foundation of a strong risk management program. It also notes that regulators now expect organizations to promote an ethical culture. The document provides guidance on establishing a culture of integrity, including defining organizational values around ethics, consistency of messaging from leadership, accountability, and rewarding ethical behavior. It acknowledges some challenges in defining, instilling, and maintaining a strong culture.
This document discusses the importance of strong character and ethics in leadership. It argues that character, defined as an individual's moral qualities, is the most inspiring trait in a leader. The core attributes that make up good leadership character are integrity, authenticity, the ability to listen, having a positive tone and outlook, emotional intelligence, confidence, and sharing a vision. For organizations to foster an ethical culture, leaders must think beyond short-term profits, address unethical behaviors promptly, and promote values of respect, honesty and integrity through their words and actions to encourage ethical decision-making.
The document discusses factors that differentiate good ethics and compliance programs from great ones. It outlines five key factors: tone at the top from the board and senior management, a culture of integrity, thorough risk assessments, robust testing and monitoring programs, and an effective chief ethics and compliance officer. When these factors are embedded in an organization's operations, it significantly improves its ability to protect itself from risks and strengthen relationships with stakeholders.
The document discusses factors that differentiate good ethics and compliance programs from great ones. It outlines five key factors: tone at the top from board and senior management, a culture of integrity, thorough risk assessments, robust testing and monitoring programs, and an effective chief ethics and compliance officer. When these factors are embedded in an organization's operations, it significantly improves its ability to protect itself from risks and strengthen relationships with stakeholders.
Ethics in AccountingKeys to Reducing FraudAbstra.docxhumphrieskalyn
Ethics in Accounting
Keys to Reducing Fraud
Abstract: The major problem facing accounting today is the ethical and moral decline of accounting professionals. The American Institute of Certified Public Accountants (AICPA) has published ethical rules to guide accounts and protect the trustworthiness of their decisions in the event an ethical dilemma arises. However today, the profession remains challenged with the need to invest in the growth and development of ethical and moral reasoning of accounting professionals to protect them from veering from ethical standards. This paper will explore ethical concepts such as professional conduct and integrity and how emphasis on these ethical values will affect fraud.
Table of Contents
I. Executive Summary 1
II. Introduction 1
III. Review of Literature 1
IV. Analysis 1
V. Recommendations 1
VI. Summary and Conclusions 1
VII. Appendix x 1
VIII. References 1
ACCT 601 – Accounting Capstone
Ethics in accounting
Page 0 of 3I. Executive Summary
Due week 7II. Introduction
Problem statement and how the topic fits with the course, the degree, and your focus area.
Include a reason for the audience to read the paper. Include an overview of what you are going to cover in your paper and the importance of the material.
Preview the main ideas and the order in which they will be covered.
Establish a tone of the document.
Accounting is the process by which financial transactions are monitored, tracked and examined. It aims to provide a means of determining the expenditure levels of an institution and it provides a means of maintaining transparency and honesty in the recording of business transactions. While most accounting is completed using technology, software is easily manipulated by people. Thus, individuals are the least reliable part of the process, as they are susceptible to influence from outside sources and defiant personal decisions. Therefore, the major problem facing accounting is the ethics and morals of the individual accountants. This paper will determine the importance of specific aspects, such as autonomy, confidentiality, professional conduct and integrity and establish the overall ethical characteristic necessary to ensure proper accounting and inhibit fraud.
Autonomy
According to Kant's moral philosophy, autonomy is the capacity of an individual to act based on objective morality rather than personal desires or other influences. In accounting, managers make decisions on their own without the input or approval of higher authorities. In some cases, this self-rule or individuality may affect decisions made due to pressures of the moment rather than the right decisions for the company. In other words, singular decisions made with the aim of bias in the outcome in favour of either a party involved in the process or the decision maker rather than for the greater good is in itself corrupt. Therefore, to ensure decisions are made with the best intentions of the organization, rather than othe.
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This document discusses business governance in industries. It defines business governance and its major components, including proper definition, clear vision/strategy, roles and responsibilities, policies/procedures, and communication. An effective governance plan requires leadership commitment to integrity, accountability and transparency. Issues can arise from a lack of integrity, but organizations can develop practices to promote integrity from the board level down, such as embedding values and ethics into daily operations through culture and communication. Leadership support is key to overcoming resistance and successfully implementing integrity-building strategies.
The document discusses the roles and responsibilities of corporate boards and top management. It states that boards are responsible for setting strategy, hiring and firing the CEO, monitoring management, and representing shareholder interests. Top management, led by the CEO, is responsible for executing strategy and providing leadership. The document also discusses trends like increasing pressure from institutional investors and demands for more stock ownership from directors and managers.
Corporate governance is a system that directs and controls management with accountability and integrity to serve shareholders and stakeholders. It encompasses policies, processes, and people. Sound corporate governance relies on external market forces and legislation as well as strong internal policies and board culture. Principles of corporate governance include transparency, board oversight, integrity, and protection of shareholder rights. Institutional investors believe good governance leads to higher returns and better access to financing. Surveys show investors place a premium on well-governed companies.
The document discusses the history and definitions of corporate governance. It provides several definitions of corporate governance from different sources that generally see it as the system for directing and controlling companies, balancing economic and social goals, and motivating efficient management. The document then gives a historical perspective on how corporate governance grew in importance after scandals in the 1970s/80s and economic crises in Asia in the late 1990s, leading to reforms and greater focus on transparency, oversight and stakeholder interests.
This document presents a framework for developing ethical business through cooperation among owners, managers, and accountants from an Islamic perspective. It discusses how a lack of ethics can hinder business and the roles that owners, managers, and accountants play. Owners evaluate information from managers and accountants to make decisions, managers implement, and accountants provide financial information and alternatives. The framework aims to guide these parties to work together ethically for the benefit of all stakeholders.
Corporate governance and social responsibilityFickar Mandela
The document discusses the roles and responsibilities of corporate boards and top management. It states that boards are responsible for setting strategy, hiring and firing the CEO, monitoring management, and representing shareholder interests. Top management, led by the CEO, is responsible for executing strategy and providing leadership. The document also discusses trends like increasing pressure from institutional investors and demands for more stock ownership from directors and managers.
Ron Peyton argues that implementing high ethical standards in the investment industry is important and beneficial. He outlines principles-based ethics as more effective than rules-based, noting firms should develop ethical guidelines based on principles rather than rules. Peyton recommends regularly reminding professionals about ethics to encourage ethical behavior, and that culture plays a key role by promoting mission and values beyond just financial incentives. Firms should strive to act with integrity to build trust with clients and the public.
Serial entrepreneurs create multiple successful businesses that employ others. This document analyzes the traits of serial entrepreneurs in three areas: attitudes, behaviors, and professional skills. It finds that serial entrepreneurs highly value profit/usefulness (utilitarian attitude) and knowledge (theoretical attitude). Their behaviors include being very competitive, trusting, and rule-breaking. They exhibit above-average mastery in skills like leadership, goal-orientation, and persuasion. The document concludes that serial entrepreneurs have the right attributes and focus from a young age to succeed in building multiple businesses.
The document discusses the evolution and increasing prevalence of advisory boards. It notes that advisory boards are becoming more common as companies seek to manage risk, identify opportunities, and build resilience in complex environments. Advisory boards provide independent expert advice on issues like sustainability, stakeholder expectations, and societal issues. The document analyzes 150 large European companies and finds that two-thirds have advisory boards, which on average consist of 7 members and meet 2-4 times per year. It identifies three common phases in the development of advisory boards: starting as internal committees, then focusing on specific issues, and ultimately evolving into broader advisory boards. External perspectives provided see advisory boards as valuable if they have good representation, influence senior levels, have a clear mandate,
The document discusses the evolution and increasing prevalence of advisory boards. It notes that advisory boards are becoming more common as companies seek to manage risk, identify opportunities, and build resilience in complex environments. Advisory boards provide independent expert advice on issues like sustainability, stakeholder expectations, and societal issues. The document analyzes 150 large European companies and finds that two-thirds have advisory boards, which on average consist of 7 members and meet 2-4 times per year. It identifies three common phases in the development of advisory boards: starting as internal committees, then focusing on specific issues, and ultimately evolving into mature advisory boards that address a wide range of strategic themes. Experts provide perspectives on how advisory boards can effectively influence companies when they have
Concept of business ethics, the importance of ethics in business, myths about business ethics, morale reasoning, the morality of profit motive, ethics and philosophy, ethics and morality, benefits of business ethics, code of conducts; meaning and importance of social responsibility, the evolution of CSR, a morale argument of CSR, increasing relevancy of CSR, social responsibility and ethics, CSR domains.
The significance of corporate governance in a globalizedScott Odigie
This document outlines Scott Odigie's presentation on the significance of corporate governance in a globalized economy. It defines corporate governance and discusses it as an integral part of success. The presentation covers principles of corporate governance like rights of shareholders, roles of the board, and transparency. It argues that corporate governance is crucial for national development, foreign investment, and company performance globally. In conclusion, corporate governance is presented as an indispensable part of human existence and business.
Corporate Governance a Balanced Scorecard approach with KPIs between BOD, Exe...Chris Rigatuso
This document proposes using a Balanced Scorecard approach to improve corporate governance. It involves implementing three integrated scorecards: a Board Balanced Scorecard to clarify the board's strategic role and information needs, a Corporate Balanced Scorecard for the CEO to define and manage strategy, and an Executive Balanced Scorecard for aligning executives. The scorecards would provide transparency into strategic performance and non-financial drivers of value to strengthen oversight roles.
The following report by the Credit Suisse
Research Institute explores several important
aspects of the connection between sound governance
and improved business performance. It provides
new data to support the growing investor
interest in governance-related rules and practices
and introduces innovative ways to assess corporate
performance, such as the HOLT governance scorecard,
to support more effective governance-oriented
decision making. Moreover, our experts identify specific
company types and sectors, in which governance
can serve as a particularly robust investment
strategy instrument. Corporate governance is further
likely to contribute to investment decisions in
emerging economies, for instance when firm-level
structures actively compensate for the possible
absence of country-level governance provisions.
Corporate governance is important for companies to protect shareholder interests and manage risks. It involves transparency, accountability, and oversight between key stakeholders like shareholders, management, and boards of directors. Not applying effective governance can lead to financial failures, loss of shareholder rights, and lack of transparency deterring investment. Risks include mismanagement, abuse of power, loss of foreign investment, and withdrawal of capital. Governance aims to standardize responsibilities and achieve fairness, efficiency, and optimal resource use through transparency and accountability.
This document contains a test bank of questions and answers related to corporate governance. It covers topics such as the primary goals and mission of public companies, the roles of corporate governance gatekeepers, how corporate governance structures improve investor confidence, the intent of corporate governance reforms, and the benefits of proper implementation of the Sarbanes-Oxley Act. Discussion questions address additional topics such as defining and assessing corporate governance, the influence of corporate culture, and integrating corporate governance into business education curriculum.
This document discusses the relationship between governance, development, innovation and regulation for companies. It argues that governance alone is not sufficient for companies to continually regenerate themselves in the face of changing environments. Development, defined as entrepreneurship, is also needed to cause the necessary value-targeted behaviors. Bringing together development and governance can help assure competencies are mature enough to be effective, consistent and stable, while also supporting corporate adaptability. This coordination of development and governance enables business continuity despite environmental changes.
Elizabeth Homes offered the world a miracle technology which would have changed medicine forever in the same beautiful package as many other Silicon Valley giants.
Memphis business journal. strengthening the ethical culture of your organizat...Barbara Richman, SPHR
The document discusses the findings of the 2011 National Business Ethics Survey which found that while some positive indicators exist, such as low misconduct and high reporting of issues, there are also warning signs of a potential decline in ethics. Specifically, the survey found a sharp rise in retaliation against whistleblowers, increased pressure on employees to compromise standards, and weakening ethical cultures at companies. As the economy improves, companies may lose focus on ethics and misconduct could rise unless strong ethical cultures are maintained. The document provides recommendations for strengthening organizational ethical cultures, such as ensuring leadership commitment to ethics, developing clear policies, preventing retaliation, training employees, and regularly discussing workplace ethics.
Cost and benefit analysisWe are doing group presentation.docxvoversbyobersby
Cost and benefit analysis
We are doing group presentation tomorrow but we are struggling to make the
presentation sldies. We need presentation slides.
Could you guys help me? Maximum slides we have to make are 11 pages.
Below are structure of prejesentation we should do.
<>
In your analysis, make sure you take the followings into consideration:
•
the alternative projects ,
•
the groups who benefit and suffer from project,
•
list the physical impact of alternatives,
•
predict monetary value of those impacts (benefit and cost) over the life of project in terms of their present value,
•
conclude which of the alternative project should be selected.
-----------------
Addendum: PT slides
•
1 intro slide that discusses the motivation behind the project and CBA
•
Information about which groups have standing, and how they either benefit or lose from the considered policies
•
Numbers, sources
•
Conclusion
•
1-2 slides on other key information you would need to conduct a thorough analysis
•
1-2 slides at the end with a list of sources
Addendum: PT slides
Do Not Include:
•
Typos and spelling/grammar mistakes.
•
Basic definitions of CBA terms.
•
Too many pictures.
•
Unsubstantiated claims (unless you explicitly states that you had made the judgement call because there was insufficient data)
.
Cosmetics as endocrine disruptors are they a health risk.docxvoversbyobersby
Cosmetics as endocrine disruptors: are they a health risk?
Polyxeni Nicolopoulou-Stamati1 & Luc Hens2 & Annie J. Sasco3
Published online: 29 January 2016
# Springer Science+Business Media New York 2016
Abstract Exposure to chemicals from different sources in
everyday life is widespread; one such source is the wide range
of products listed under the title Bcosmetics^, including the
different types of popular and widely-advertised sunscreens.
Women are encouraged through advertising to buy into the
myth of everlasting youth, and one of the most alarming con-
sequences is in utero exposure to chemicals. The main route of
exposure is the skin, but the main endpoint of exposure is
endocrine disruption. This is due to many substances in cos-
metics and sunscreens that have endocrine active properties
which affect reproductive health but which also have other
endpoints, such as cancer. Reducing the exposure to endocrine
disruptors is framed not only in the context of the reduction of
health risks, but is also significant against the background and
rise of ethical consumerism, and the responsibility of the cos-
metics industry in this respect. Although some plants show
endocrine-disrupting activity, the use of well-selected natural
products might reduce the use of synthetic chemicals.
Instruments dealing with this problem include life-cycle
analysis, eco-design, and green labels; in combination with
the committed use of environmental management systems,
they contribute to Bcorporate social responsibility .̂
Keywords Endocrine active substances . Endocrine
disruptors . Cosmetics . Sunscreens
1 Introduction
Women and men all over the world use large amount of cos-
metic products in pursuit of everlasting youth, ignoring the
probable health risks. The commercial category of Bcosmetic
products^ entails substances or mixtures of substances that are
designed mainly for external use, for instance to improve the
appearance; clean; perfume; and sometimes protect as in the
case of sunscreens [1]. Many cosmetic products such as oils
and lipsticks contain UV filters, even though they are not
marketed under the term Bsunscreens^ or Bsun lotions^.
Cosmetic products contain active substances, preservatives
and also the so-called Bfragrances^ or Bperfumes^, the exact
composition of which remains a secret under the trade secret
standards [2].
Increasing scientific concern exists about the nature and the
safety of the ingredients used by the cosmetics industry re-
garding their endocrine-disrupting effects. Although numer-
ous studies have proved the endocrine-disrupting potential of
many ingredients, such as parabens, phthalates and UV filters,
and also their ability to cause reproductive impairments [3–6],
these substances are still extensively used and characterized as
Bsafe^. The main justification is the fact that manufacturers
keep the concentrations of the suspected chemical substances
low in accordance with the relevant legislation. However, the
possib.
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The following report by the Credit Suisse
Research Institute explores several important
aspects of the connection between sound governance
and improved business performance. It provides
new data to support the growing investor
interest in governance-related rules and practices
and introduces innovative ways to assess corporate
performance, such as the HOLT governance scorecard,
to support more effective governance-oriented
decision making. Moreover, our experts identify specific
company types and sectors, in which governance
can serve as a particularly robust investment
strategy instrument. Corporate governance is further
likely to contribute to investment decisions in
emerging economies, for instance when firm-level
structures actively compensate for the possible
absence of country-level governance provisions.
Corporate governance is important for companies to protect shareholder interests and manage risks. It involves transparency, accountability, and oversight between key stakeholders like shareholders, management, and boards of directors. Not applying effective governance can lead to financial failures, loss of shareholder rights, and lack of transparency deterring investment. Risks include mismanagement, abuse of power, loss of foreign investment, and withdrawal of capital. Governance aims to standardize responsibilities and achieve fairness, efficiency, and optimal resource use through transparency and accountability.
This document contains a test bank of questions and answers related to corporate governance. It covers topics such as the primary goals and mission of public companies, the roles of corporate governance gatekeepers, how corporate governance structures improve investor confidence, the intent of corporate governance reforms, and the benefits of proper implementation of the Sarbanes-Oxley Act. Discussion questions address additional topics such as defining and assessing corporate governance, the influence of corporate culture, and integrating corporate governance into business education curriculum.
This document discusses the relationship between governance, development, innovation and regulation for companies. It argues that governance alone is not sufficient for companies to continually regenerate themselves in the face of changing environments. Development, defined as entrepreneurship, is also needed to cause the necessary value-targeted behaviors. Bringing together development and governance can help assure competencies are mature enough to be effective, consistent and stable, while also supporting corporate adaptability. This coordination of development and governance enables business continuity despite environmental changes.
Elizabeth Homes offered the world a miracle technology which would have changed medicine forever in the same beautiful package as many other Silicon Valley giants.
Memphis business journal. strengthening the ethical culture of your organizat...Barbara Richman, SPHR
The document discusses the findings of the 2011 National Business Ethics Survey which found that while some positive indicators exist, such as low misconduct and high reporting of issues, there are also warning signs of a potential decline in ethics. Specifically, the survey found a sharp rise in retaliation against whistleblowers, increased pressure on employees to compromise standards, and weakening ethical cultures at companies. As the economy improves, companies may lose focus on ethics and misconduct could rise unless strong ethical cultures are maintained. The document provides recommendations for strengthening organizational ethical cultures, such as ensuring leadership commitment to ethics, developing clear policies, preventing retaliation, training employees, and regularly discussing workplace ethics.
Similar to financial leadershipETHICALC O N D U C TWHAT FINANC.docx (20)
Cost and benefit analysisWe are doing group presentation.docxvoversbyobersby
Cost and benefit analysis
We are doing group presentation tomorrow but we are struggling to make the
presentation sldies. We need presentation slides.
Could you guys help me? Maximum slides we have to make are 11 pages.
Below are structure of prejesentation we should do.
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In your analysis, make sure you take the followings into consideration:
•
the alternative projects ,
•
the groups who benefit and suffer from project,
•
list the physical impact of alternatives,
•
predict monetary value of those impacts (benefit and cost) over the life of project in terms of their present value,
•
conclude which of the alternative project should be selected.
-----------------
Addendum: PT slides
•
1 intro slide that discusses the motivation behind the project and CBA
•
Information about which groups have standing, and how they either benefit or lose from the considered policies
•
Numbers, sources
•
Conclusion
•
1-2 slides on other key information you would need to conduct a thorough analysis
•
1-2 slides at the end with a list of sources
Addendum: PT slides
Do Not Include:
•
Typos and spelling/grammar mistakes.
•
Basic definitions of CBA terms.
•
Too many pictures.
•
Unsubstantiated claims (unless you explicitly states that you had made the judgement call because there was insufficient data)
.
Cosmetics as endocrine disruptors are they a health risk.docxvoversbyobersby
Cosmetics as endocrine disruptors: are they a health risk?
Polyxeni Nicolopoulou-Stamati1 & Luc Hens2 & Annie J. Sasco3
Published online: 29 January 2016
# Springer Science+Business Media New York 2016
Abstract Exposure to chemicals from different sources in
everyday life is widespread; one such source is the wide range
of products listed under the title Bcosmetics^, including the
different types of popular and widely-advertised sunscreens.
Women are encouraged through advertising to buy into the
myth of everlasting youth, and one of the most alarming con-
sequences is in utero exposure to chemicals. The main route of
exposure is the skin, but the main endpoint of exposure is
endocrine disruption. This is due to many substances in cos-
metics and sunscreens that have endocrine active properties
which affect reproductive health but which also have other
endpoints, such as cancer. Reducing the exposure to endocrine
disruptors is framed not only in the context of the reduction of
health risks, but is also significant against the background and
rise of ethical consumerism, and the responsibility of the cos-
metics industry in this respect. Although some plants show
endocrine-disrupting activity, the use of well-selected natural
products might reduce the use of synthetic chemicals.
Instruments dealing with this problem include life-cycle
analysis, eco-design, and green labels; in combination with
the committed use of environmental management systems,
they contribute to Bcorporate social responsibility .̂
Keywords Endocrine active substances . Endocrine
disruptors . Cosmetics . Sunscreens
1 Introduction
Women and men all over the world use large amount of cos-
metic products in pursuit of everlasting youth, ignoring the
probable health risks. The commercial category of Bcosmetic
products^ entails substances or mixtures of substances that are
designed mainly for external use, for instance to improve the
appearance; clean; perfume; and sometimes protect as in the
case of sunscreens [1]. Many cosmetic products such as oils
and lipsticks contain UV filters, even though they are not
marketed under the term Bsunscreens^ or Bsun lotions^.
Cosmetic products contain active substances, preservatives
and also the so-called Bfragrances^ or Bperfumes^, the exact
composition of which remains a secret under the trade secret
standards [2].
Increasing scientific concern exists about the nature and the
safety of the ingredients used by the cosmetics industry re-
garding their endocrine-disrupting effects. Although numer-
ous studies have proved the endocrine-disrupting potential of
many ingredients, such as parabens, phthalates and UV filters,
and also their ability to cause reproductive impairments [3–6],
these substances are still extensively used and characterized as
Bsafe^. The main justification is the fact that manufacturers
keep the concentrations of the suspected chemical substances
low in accordance with the relevant legislation. However, the
possib.
COSC2737 Assignment 2 IT Infrastructure in the Cloud. .docxvoversbyobersby
COSC2737 Assignment 2: IT Infrastructure in the Cloud.
In this assignment, you will combine 3 different cloud services to build an application of your choice.
Typically, this might include a web-facing component. The focus of the assignment is not this content, but
the infrastructure behind it – the “wiring”, if you will.
As part of the assignment, you will create a presentation video. If this is done well, you will be able to add
these to a portfolio of work that you can demonstrate at job interviews, etc….
NB. This assignment is focused on Amazon products, primarily because that is what we teach in ITIS,
but, you are also allowed to use Google or Microsoft products, or a combination – but only with prior
permission from the Course Coordinator. And we may not be able to help you if problems between
vendor products arises.
For this assignment, you will provide a simple working cloud implementation, and submit the contents in a
ZIP file to Canvas, along with a presentation video, a report, and an initial PDF “pitch” document submitted
some weeks earlier than the deadline.
Note that the web content itself is not evaluated, only how it is set up. So you can use material from
anywhere (as long as you cite it on the web pages).
List of Amazon Services: https://aws.amazon.com/products/
List of Amazon services available to AWS Educate: https://s3.amazonaws.com/awseducate-starter-account-
services/AWS_Educate_Starter_Accounts_and_AWS_Services.pdf also available on Canvas.
Submission Details
1. Build a cloud infrastructure using at least 3 components from the AWS list of products above:
1. This could be a server and storage, or compute, or whatever.
2. One of the components counted could be the use of Alexa services for query.
2. The topic of the website is up to you, but must have a least (say) 5 different pages, and must ideally
be some form of B2B flavour.
3. Submission will be the following:
1. Pitch Document – An initial “pitch” where you describe your proposal in a few paragraphs
(not more than a page)
1. This will be due in week 11
2. Worth 5%, and will provide feedback from your tutor.
2. Report – A PDF report containing the following sections
1. Rationale
- The rationale behind this website or cloud construction. More or less a copy
of the pitch in its final form.
2. Cost Estimates
- both development, fixed and cloud running and how these running cost
scales for LOW (1-1000 transactions/day), MEDIUM (1000-1,000,000), and
HIGH (above 1,000,000+ transactions per day) – hese costs all to be
itemised and justified
- Imagine you are a professional quoting for the job
3. An installation manual that
- contains instructions to recreate the website(s)
- A marker should be able to rebuild it him/herself from this
4. There is no limit on report size, but a guide is about 10-15 pages including figures,
screen dumps, etc.
.
https://aws.amazon.com/prod.
Cortes and the Aztecs Respond in writing to the following questi.docxvoversbyobersby
Cortes and the Aztecs
Respond in writing to the following questions after reading Cortés' letter on page 260 and watching the two videos above.
1. What aspects of Aztec life and culture favorably impressed Cortés? Of what was he critical?
2. With their belief in a pantheon of deities, how might an Aztec have reacted upon visiting a Christian house of worship such as Chartres Cathedral?
3. What is the Colombian Exchange? List the consequences of the exchange.
Make sure to:
· Write a short essay or paragraph of at least 100 words. Do not go over 250 words.
· Use concrete examples/details and avoid generalities.
· Address all questions.
· Use proper grammar and punctuation.
· If you researched your topic and are using information from what you learned, remember to cite your sources.
· Do not plagiarize. Your work will be checked by turnitin.com.
.
Correlation and RegressionForecasting is a critical job for mana.docxvoversbyobersby
This document discusses correlation, regression, and cluster analysis as statistical methods for forecasting. Correlation quantifies the relationship between two variables from -1 to 1. Regression constructs an equation describing the relationship between variables to forecast scenarios. Cluster analysis groups objects with similar characteristics into clusters to categorize large amounts of data. The document recommends using cluster analysis to analyze consumer survey responses that have interdependent factors. It provides examples of how companies have used cluster analysis for market segmentation, product categorization, and anomaly detection.
Correlation and Regression StudyBackground During this week .docxvoversbyobersby
Correlation and Regression Study
Background
During this week you will identify a research question created in Week 1 for which correlation or regression would be the best statistical approach to take. If you do not have a research question that indicates correlation or regression, review the research questions posted by your peers last week and select one that is ideal for correlation or regression.
Discussion Assignment Requirements
Initial Posting – In your initial posting for this assignment, include the following:
•Identify an appropriate research question that would require the use of correlation and regression to answer.
•Describe why this question is appropriate for a correlational study.
•Identify the two variables in this study and each of their attributes: discrete or continuous, quantitative or categorical, and scale of measurement (nominal, ordinal, interval, or ratio).
•Do the variables fit the qualifications of a correlational study? Explain.
•What type of correlation would you expect to find for this study (i.e., positive or negative)? Explain.
•What predictions might you be interested in making with these variables if the correlation is found to be significant?
Article Critique: Correlation & Regression
The readings for this week focus on the concepts of correlation and regression. In this discussion we will apply those concepts to the review and critique of Wagenheim & Anderson (2008). For information on how to critique a research article, see the Coughlan et al. (2007) from your resources in Week 1 and UIS (n.d.) from your resources in Week 2.
In the body of your posting, include an overview of the following topics:
•Research question – State the research question for the study.
•Methods and study design – Describe the basic methods used, including the variables, sampling methods, data collection, etc.
•Data analysis – Summarize the statistical tests conducted, the results obtained from each test, and the conclusions regarding the research question.
•Critique – Critique the results of the study, paying specific attention to the appropriateness of the analyses conducted, any biases or assumptions that were made, practical significance of the results, and recommendations for improving upon the study (methods or analyses).
•Summary – Provide a brief summary of the study's findings in 2-3 sentences. Do not use any numbers or statistical terms, but provide a review that would make sense to someone who has not studied research methods or statistics.
Be sure to put information in your own words and to cite appropriately. Respond substantively to at least two of your classmates’ postings. Specifically, focus on their critique of the results and discussion of the analysis. Do you agree with their assessment? What questions did the study leave you with? How might you have done this study differently? What do you see as the limitations of the study as compared to your classmates?
Z, T, or Chi-Square Test Study
Background
During th.
Correlate your job responsibilities with the Disaster recovery c.docxvoversbyobersby
Correlate your job responsibilities with the Disaster recovery course outcomes listed above. Should be Minimum 200 words
Disaster Recovery Course Out-come
• Recognize the need for disaster recovery plans within organizations.
• Develop a complete and accurate disaster recovery plan.
• Assess risks that may impact an organization
• Identify data storage and recovery sites.
• Develop plans, procedures and relationships.
• Develop procedures for special circumstances.
• Test the disaster recovery plan.
• Continue to assess needs, threats, and solutions after testing the disaster recovery
plan.
Job Responsibility:
· Responsible in delivering the complete
Project Plan with total supporting data which included the status Reports, Issues Log, Performance Testing Matrix, detailed Testing Reports, Fine tuning Recommendation reports to both Executive Management & Senior Management
· Responsible to provide Technical and Functional Support to the users, tester and Business System Analysts
· Managing and Preparation of the Test Plan and Test strategy for the various projects
· Liaison with the onsite and offshore teams for testing status and issue resolution
· Tested the data mapping, fixing errors
· Tested staging table for EDI 210 Invoice, Balance Due Invoice, EDI 810 Invoice inbound, 850 Inbound Purchase order
· Tested Web service using SoapUI
· Involved in User acceptance testing (UAT)
· Written standard test scripts for Oracle Financial, Procure to Pay, SOA, web services
· Involved in standard Functionality testing in Phase I Phase II for 3 Instance
· Documented and communicated test results to the test Management and Business Management Team
· Worked closely with Developers team for different issues
· Experience with test automation tools like JIRA
· Worked on the testing of SaaS, Web services, XML and web application.
.
Correctional CounselingRobert HanserScott Mire20111 The .docxvoversbyobersby
This document provides definitions and context for correctional counseling. It begins by defining corrections as the component of the criminal justice system responsible for offenders after conviction. Correctional counseling is then defined as a process where trained counselors help offenders improve behaviors and reduce criminal involvement. The document discusses the origins of counseling in guidance and psychotherapy. It also addresses criticisms of past definitions of correctional counseling and the importance of evaluating it scientifically.
Correlate health and safety issues at workplace with ideals. Y.docxvoversbyobersby
Correlate health and safety issues at workplace with ideals.
Your response should be at least 200 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.
Hartman, L., DesJardins, J., & MacDonald, C. (2014). 1.
Business ethics: decision making for personal integrity and social responsibility
(3rd ed., pp. 276-283). New York: McGraw-Hill.
No Wiki, Dictionary.com or Plagiarism
.
Correctional Program ShowcaseSubmitted BY Intensive moti.docxvoversbyobersby
Correctional Program Showcase
Submitted BY
Intensive motivational program of alternative correctional treatment (IMPACT)
IMPACT- Two phase program
Mission: to engage and rehabilitate the offenders with sentence of seven years
Goals: To engage the offenders into correction program for their betterment
To help the offenders to live a life with worth with out committing a crime.
Intensive motivational program of alternative correctional treatment (IMPACT) is a program that is based on the two phases, it is continuation shock incarcerations that initially started in the 1987. The mission of the program is to engage the offenders who are sentenced for 7 years into correctional program. Goals of the program is to engage the offender voluntarily in the two phase program and they can quite if they are not willing to continue the program. The offenders ahs to pass through the phases and complete the instructions of the drill instructors. The target population is based on the offender who do not mix in to normal general population. IMPACT is among the top three programs of the state to correct and rehabilitate the offenders (Mackenzie & Shaw, 2006).
2
Intensive motivational program of alternative correctional treatment (IMPACT)
Population : Offenders with sentence of seven years
Effectiveness:
Increased the prosocial behavior in offenders
Decreased the aggression and anxiety
Improvements have been seen in the offenders that lead them towards rehabilitation.
The program is effective for the offenders by send in to the offenders into military boot camps. Offenders who were engage in the IMPACT program were reported as having the high prosocial behaviors anxiety and aggression have been lowered in the offenders who have completed the program. Offender with change are promoted to the next phase of rehabilitation (Mackenzie & Shaw, 2006). It was designed because authorities are aware of that emotional instability is a main reason behind the offenses. Thus this program helped to provide emotional stability and also help in rehabilitation process.
3
Reentry Program
Reentry program is basically developed as a correctional program which is covering different aspects.
Educational paradigm
Health sector
Rehabilitation sector
Job skills and Employment Readiness program
Reentry programs is an effort made by the Louisiana corrections. The mission of the program is to provide the services regarding education, job and employment skills, substance abuse treatment and rehabilitation services are offered by the programs to education the offenders and help them rehabilitate in the society. Reentry program was designed to motivate those offenders who came again after relapse of drugs or crime. This program focus on all areas of life of offenders because it not only provided basic education but also provide job skills to make them productive member of society. Some profit and not for profit organizations help to design and to make it effective by financ.
Corrections in America - please type the answers separateDiscu.docxvoversbyobersby
Corrections in America - please type the answers separate
Discussion Board #2A : Research and discuss the differences between State and Federal Prison Systems. Who goes to Prison in each of these systems? What about Women Offenders? What about Juvenile Offenders?
iscussion Board #2B concerns Racial Issues within Prison Systems. Research and discuss if there is racial disparity as to who is sent to jail/prison. Are all groups sentenced equally? Why is there an issue with fair sentencing? Who is to blame?
.
Correction to be made for my code of ethical plan Inclusion of.docxvoversbyobersby
Correction to be made for my code of ethical plan: Inclusion of a letter from leadership to the reader of the Code of Ethics. This sets the tone and lets the reader know why the Board of Directors and management consider the code of Ethics important.
2. Accetable and unacceptable behavior on the part of employees.
3. Resources for more information and what to do if unethical behavior is seen such as contact information for an Ethics Compliance Officer or if someone needs to report unethical conduct. This includes reporting procedures.
4. Ethics training and awarness program for your company.
5. Consequences of unethical /or illegal behavior
6. The legal regulations of conducting business overseas.
7. The ethical code of conduct for employees and vendors
8. Distingushing between right and wrong in business dealings when the action is legal
9. Identifying the issues surrounding the motivation behind unethical or illegal business operations when the consequences are properly documented.
10. Anything else that you deem important support your ethical code of conduct plan.
11. Your ethical code of conduct plan should demonstrate your understanding of the concepts and ideas covered throughout the course.
1,250--1,500 words and references.
.
Correct the following paragraph. Insert or delete hyphens as nee.docxvoversbyobersby
Correct the following paragraph.
Insert or delete hyphens as needed in the following paragraph:
1
Attending College in New York City can be pretty scary, especially for a small-town girl from Des Moines, Iowa.
2
Since I am studying nursing, I decided to join Scorpions for Smiles, a student-volunteer-group that visits children who spend a-lot of time in the hospital wards for recovery or treatment purposes.
3
It's a great feeling knowing that a sick or hurting child is benefiting from my time and up-beat attitude.
4
The last time I visited, I brought coloring supplies so that Amy, the eight year old patient I usually spend time with, and I could draw pictures for her family.
5
Amy is a very well known patient; she is always playing practical jokes on the nurses and doctors!
6
When I went visited with my student group this past week, Amy wasn't there because she had an X-ray scheduled.
7
I left her a note with some crayons so that she could color after the procedure.
8
Next week is her birth-day.
9
. I won't be visiting that day, but when I do, I'll bring two plain t shirts to decorate with paints and markers.
10
The corner store near my dorm has cake-mix for only ninety nine cents!
11
. I'll bring a cake for Amy and-the-rest of her friends, too!
Step 2
Save and submit your assignment.
.
Correctional AdministratorsPrisons and jails are both clas.docxvoversbyobersby
Correctional Administrators
Prisons and jails are both classified as correctional facilities, however their missions and day-to-day operations can vary significantly. The types of offenders being held and the reasons they are incarcerated are notably different between a state or federal prison and a county jail.
In your initial response,
A)
Compare and contrast the role of a correctional administrator at a prison vs. a jail.
B)
Be sure to highlight the missions of both and how those missions impact the way day-to-day operations are managed by a correctional administrator.
Assignment Instructions:
1) Based on research, and
2) Using professional, scholarly sources, and
3) Submitted in APA 6th ed style, and
4) A minimum of 350 words, excluding the references list.
.
Corporations are making the assumption that everyone uses a sm.docxvoversbyobersby
Corporations are making the assumption that everyone uses a smartphone. How does this perpetuate the negative outcomes created by the “Digital Divide”?
Your rough draft is your work-in-progress version of your final paper (which is due on Sunday). The purpose of the rough draft assignment is to allow me to understand where your team is at, and to be able to provide feedback that you can use for refining your paper.
Your paper should have the following characteristics:
Be in APA format
Have the following sections:
Title page
Abstract (from Friday's assignment - revised according to the feedback that was given (if any).
Rough draft, this should address:
Introduction
Background/Literature Review
Relevant Theory Exploration
Findings/Examples
Lessons Learned
Future Research
References (non-annotated)
Appendix:
.
Corporation M, a calendar year corporation that began doing business.docxvoversbyobersby
Corporation M, a calendar year corporation that began doing business on January 1, 20X1, had accumulated earnings and profits of $30,000 as of January 1, 20X8. On July 2, 20X8, M distributed $22,000 cash to Mrs. C, M's sole shareholder. M had a $20,000 deficit in earnings and profits for 20X8. Mrs. C had an adjusted basis of $14,000 in her stock before the distribution. What is the amount of Mrs. C's basis in the stock after the distribution?
.
CORPORATE TRAINING 1
Running head: APA IS EASY
Paper Title
Student’s Name, Class
University of the Cumberlands
Note the
header &
the page
number.
Also this
the header
is l/2 inch
from the
top (p. 306)
Double spaced,
upper/lower case and
centered on the page.
See pg 41, APA, 6th
edition
Ask your facilitator if
they desire the date/their
name on title page.
APA doesn’t require it.
Running
head is
typically
optional –
ask your
instructor –
used
primarily if
publishing
CORPORATE TRAINING 2
Corporate Training
Today, managers need well-trained employees and are finding they do not exist.
Corporations are, therefore, providing additional training for their employees. One such training
program that is being added to corporate learning environments is an awareness of emotional
intelligence. Business managers are learning that successful managers need high Emotional
Quotient (EQ) or Emotional Intelligence (EI) to work effectively. Emotional intelligence is the
ability to accurately perceive emotions in self and others, to identify different emotional
responses, and to use emotional information to make intelligent decisions (Goleman, 2000). A
leading expert on EQ finds that “people good at managing relationships tend also to be self-
aware, self-regulating, and empathetic” (Goleman, 2000, p. 33). Emotional intelligence is
especially important “at the highest levels of the company, where differences in technical skills
are of little importance. In other words, the higher the rank of the person, the more emotional
intelligence capabilities are needed for decision making effectiveness” (Goleman, 1986, p. 94).
Emotional intelligence is crucial to a successful business career and for effective group
performance (Goleman, 1986). The core competencies required for emotional intelligence are
“the perception of emotions in one’s self and others, the understanding of these emotions, and
the management of emotions” (Feldman, 2001, ¶ 4). Success in the modern workplace requires
teamwork and collaboration. Emotional Intelligence training is essential since most modern
Title of
paper is
centered.
Do not
bold. Do
not cap.
Text is
ragged
edge,
double-
spaced
This is a
direct
quote
complete
with
quotation
marks so
the writer
must
provide
needs to
direct
readers to
direct
This is not
a direct
quote but
para-
phrased
Period after
Citation of
Short
quotes
CORPORATE TRAINING 3
companies rely on teams of employees working together, rather tha.
Corporate TAX homework problems. Need help with solving. email is .docxvoversbyobersby
Corporate TAX homework problems. Need help with solving. email is
[email protected]
Notes
Ch1 corporations
Complete the problems as presented in this document. You may create a new document and/or spreadsheet as needed. Any memo should be no more than 3 pages in length. Please state any assumptions used if problems are not clear.
Problem 1
Your client, a physician, recently purchased a yacht on which he flies a pennant with a medical emblem on it. He recently informed you that he purchased the yacht and flies the pennant to advertise his occupation and thus attract new patients. He has asked you if he may deduct as ordinary and necessary business expenses the costs of insuring and maintaining the yacht. In search of an answer, consult RIA’s CHECKPOINT TAX available on-line through the SNHU Shapiro Library. Explain the steps taken to find your answer.
Problem 2
Stacey Small has a small salon that she has run for a few years as a sole proprietorship. The proprietorship uses the cash method of accounting and the calendar year as its tax year. Stacey needs additional capital for expansion and knows two people who might be interested in investing. One would like to practice hairdressing in the salon. The other would only invest.
Stacey wants to know the tax consequences of incorporating the business. Her business assets include a building, equipment, accounts receivable and cash. Liabilities include a mortgage on the building and a few accounts payable, which are deductible when paid.
Write a memo to Stacey explaining the tax consequences of the incorporation. As part of your memo examine the possibility of having the corporation issue common and preferred stock and debt for the shareholders’ property and money.
Problem 3
Five years ago, Lacey, Kaylee, and Doug organized a software corporation, DLK, which develops and sells Online Meetings software for businesses. DLK is a C corporation. Each individual contributed $10,000 to the company in exchange for 1,000 shares of DLK stock (for a total of 3,000 shares). The corporation also borrowed $250,000 from ACME Venture Capital to finance operating costs and capital expenditures.
Because of intense competition, DLK struggled for the first few years of operation and the corporation sustained chronic losses. This year, Lacey, DLK’s president, decided to seek additional funds to finance DLK’s working capital.
CME declined to extend additional funds because of the money already invested in DLK. High Tech Venture Capital Inc. proposed to lend DLK $100,000, but at a 10% premium over the prime rate. (Other software manufacturers in the same market can borrow at a 3% premium.) First Round Capital proposed to invest $50,000 of equity capital into DLK, but on the condition that the investment firm be granted the right to elect five members to DLK’s board of directors. Discouraged by the “high cost” of external borrowing, Lacey decides to approach Kaylee and Doug.
Lac.
Level 3 NCEA - NZ: A Nation In the Making 1872 - 1900 SML.pptHenry Hollis
The History of NZ 1870-1900.
Making of a Nation.
From the NZ Wars to Liberals,
Richard Seddon, George Grey,
Social Laboratory, New Zealand,
Confiscations, Kotahitanga, Kingitanga, Parliament, Suffrage, Repudiation, Economic Change, Agriculture, Gold Mining, Timber, Flax, Sheep, Dairying,
Leveraging Generative AI to Drive Nonprofit InnovationTechSoup
In this webinar, participants learned how to utilize Generative AI to streamline operations and elevate member engagement. Amazon Web Service experts provided a customer specific use cases and dived into low/no-code tools that are quick and easy to deploy through Amazon Web Service (AWS.)
This presentation was provided by Racquel Jemison, Ph.D., Christina MacLaughlin, Ph.D., and Paulomi Majumder. Ph.D., all of the American Chemical Society, for the second session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session Two: 'Expanding Pathways to Publishing Careers,' was held June 13, 2024.
A Free 200-Page eBook ~ Brain and Mind Exercise.pptxOH TEIK BIN
(A Free eBook comprising 3 Sets of Presentation of a selection of Puzzles, Brain Teasers and Thinking Problems to exercise both the mind and the Right and Left Brain. To help keep the mind and brain fit and healthy. Good for both the young and old alike.
Answers are given for all the puzzles and problems.)
With Metta,
Bro. Oh Teik Bin 🙏🤓🤔🥰
How to Manage Reception Report in Odoo 17Celine George
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financial leadershipETHICALC O N D U C TWHAT FINANC.docx
1. financial leadership'
ETHICAL
C O N D U C T
WHAT FINANCIAL EXECUTIVES
Do To LEAD
BY FREDERICK MILITELLO AND MICHAEL
SCHWALBERG
T
oday's so-called "crisis" of
accountability or financial
integrity has been met with a
flurry of laws and regulations
designed to restore public confidence
in corporations. Likewise, many
financial institutions and some corpo-
rations seem to be trying to outdo one
another in announcing new policies
demonstrating their commitment to
integrity and ethical behavior.
Yet, a new Executive Report by the
Financial Executives Research Founda-
tion finds that the vast majority of cor-
porations and financial executives
express strong beliefs that ethical
behavior and financial integrity
remain the rule of the day. Rather than
2. believing that investor confidence can
be restored by external regulation,
they see the importance of "staying
the course" and "walking the walk" as
both the ethical gatekeeper and con-
science of their organizations.
In the study, Integrity-Based Finan-
cial Leadership and Ethical Behavior: A
Professional Response to Meeting the
Challenges and Responsibilities, finan-
cial executives from a wide range of
companies openly share thoughts,
insights and practices that relate to
the "crisis" of financial integrity.
While the findings are vast, and at
times controversial, two ideal por-
traits of ethical behavior emerged; the
"Ethically Intelligent Financial Execu-
tive" (EIFE) and the "Ethically Intelli-
gent Finance Organization" (EIFO).
The Ethically Intelligent
Financial Executive
He or she is aware of the multiple
pressures that may potentially
impinge upon the maintenance of
X, /
one's integrity, and is further aware of
the ubiquitous presence of ethical
dilemmas faced by leaders in daily
business life, and takes the time to
3. reflect upon these dilemmas.
George Boyadjis, EVP, CFO and
Treasurer of American TeleCare Inc.,
speaks for many in the study when he
observes, "So much of what we do is
driven by the creation of value
through increasing the speed of busi-
ness — shortening time to market,
accelerating growth rates, cutting
cycle times, etc. But, if we as financial
executives are truly focused on value
creation for the enterprise, then we
must also reflect on the ethics and
transparency of transactions and rela-
tionships."
The EIFE is a valued business part-
ner who actively assists the business-
es in planning, development and
T w o IDEAL PORTRAITS OF ETHICAL BEHAVIOR
EMERGED FROM A NEW
REPORT BY THE FINANCIAL EXECUTIVES RESEARCH
FOUNDATION: THE
"ETHICALLY INTELLIGENT FINANCIAL EXECUTIVE"
(EIFE) A N D THE
"ETHICAL INTELLIGENT FirviANCE ORGANIZATION" ( E I
F O ) .
www.fei.org January/February 2003 49
4. Arnold l-ldnish,
Executive Director, Finance and Chief
Accounting Officer, Eli Lilly and Co.
George Boyadjis,
EVP, CFO and Treasurer,
American TeleCare Inc,
Gary L. Ellis,
VP, Corporate Controller and Treasurer,
Medtronic Inc.
implementation of projects and goals,
and as the conscience of the organiza-
tion, he or she at times must say "no."
This executive also sets the tone at the
top and leads by example.
A highly visible role model, thc
EIFE uses every opportunity to articu-
late and demonstrate high-integrity
behavior to the finance organization
and to the organization as a whole.
This is the true meaning of integrity-
based leadership.
Finally, the EIFE typically has
received some training in the area of
ethics. When playing a leadership
role, he or she provides ample oppor-
timities to others to experience ethical
dilemmas through situational train-
ing opportunities, bringing financial
people together with busmess associ-
ates from a wide spectrum of back-
5. grounds.
Nick Cyprus, VP and Controller of
AT&T Corp. notes, "In addition to
standard controls, such as a code of
conduct and good background checks,
other controls could also be used. For
example, financial people should be
trained to identify and understand
ethical/unethical behaviors and situa-
tions. 1 like to get all my controllers
and their key leaders together to do
just that. We break into teams, where
each team gets a different business sit-
uation to deal with. They then have to
come back to the broader group and
discuss how they decided to resolve it.
"Basically, I give them the interest-
ing situations 1 see on a day-to-day
basis — not the headliners, but the
stuff you really tend to confront all of
the time. What's important is that the
training gives them an opportunity,
[so] that when they actually see that
situation, they know what to do. You
liave to set the right tone, and ethics
training helps in that regard."
The Ethically Intelligent
Finance Organization
The authors suggest that there is an
"ideal" finance organization for ethi-
cal conduct. They found it quite
extraordinary how much agreement
existed among financial executives
6. when it came to the "operationaliza-
tion" of ethical conduct through the
structure and support mechanisms
inherent in the structure of finance
organizations.
The EIFO "walks the talk of
integrity." Structurally, it strikes a bal-
ance between centralization and
decentralization. On the one hand,
concentrating too much authority in a
few hands may encourage the abuse
of power. On the other hand, a clear
functional chain of command, espe-
cially with a strong finance organiza-
tion at the top, can be an important
source of support for those financial
executives working closely with
and/or reporting to operations.
Eli Lilly and Co.'s Executive Direc-
tor, Finance and Chief Accounting
Officer, Arnold Hanish, reiterated the
importance of financial executives
being accountable to, and having the
support of, corporate finance: "Our
operations management understand
that their finance colleagues have a
certain amount of latitude and some
degree of judgment as it relates to
interpreting accounting rules and
financial matters, but ultimately must
follow the rules and behave in an ethi-
cal manner."
7. Given the plethora of rules and
regulations in the pharmaceutical
industry, they can certainly relate to
the policies and practices within
finance, maintains Hanish. If there are
any questions or grey areas, the
finance member of the operations
team generally contacts corporate for
advice and direction.
The EIEO embraces corporate
codes of ethics and mission state-
ments — formal training on such doc-
uments are imperative. Most impor-
tantly, EIFOs incorporate such codes
of conduct into their financial deci-
sion-making processes. Such rules of
conduct are more than just compii-
ance statements of behavior; they are
action statements.
At Medtronic Inc., VP, Corporate
Controller and Treasurer Gary L. Ellis
says, "There are two reference points
regarding ethics — the company mis-
sion statement and its code of con-
duct. When looking at any major
transaction or acquisition, these two
pillars become our guiding lights. If
50 FINANCIAL EXECUTIVE January/February 2003
PRESSURES ON
ETHICAL CONDUCT
8. Why do good people do bad
thlng5? Pressures on financial
professionals might tempt them
to stray from ethical behavior.
Cognizance of the pressures can
be an important preventive
measure.
• Emphasis on Short-Term
Results
Executives stressed as a criti-
cal concern the importance of
"making the numbers" in the
short term. This can lead to a
shortsighted approach to push
the envelope on both the
accounting and the business
side.
• Sweat the Small Stuff
Corporate misdeeds are often
the culmination of a series of
small steps. These are not the
notorious crimes that make
headlines, but rather the rela-
tively mundane issues faced on a
daily basis. The first step may
seem immaterial and unimpor-
tant, but can set in motion a
series of events leading to a
major ethical breach.
• Economic Downturns
9. Some executives felt that the
current ethical crisis is essentially
a cyclical event — "a down mar-
ket reveals what an up market
conceals." Clearly, pressure to
meet short-term results is exac-
erbated in a cyclical downturn.
• Accounting Rules
Accounting rules and the
transactions that they reflect
have become increasingly com-
plex and less intuitive — making
it easier to abuse the rules or
commit outright fraud. To com-
pensate, many are moving
toward greater disclosure —
which does not always mean
better understanding; it can cre-
ate more confusion for "typical"
shareholders.
we are uncomfortable with
the management or the cul-
ture of the target organiza-
tion, relevant to our mission
statement or code of con-
duct, then we won't do the
deal, no matter bow attrac-
tive it may be."
Moreover, the research
indicates that in EIFOs,
rewarding integrity and
10. integrity-based leadersiiip is
critical. Tying performance
appraisals to living a com-
pany's values and demon-
strated integrity is one way
of doing that.
Some finance organiza-
tions set their ethical tone at
the bottom as well as the
top, working with profes-
sionals (internal or external)
who assist tbem in selecting
and orienting bigh-integrity
new hires. Ethical profiling
is becoming a common and
expected practice. Several
executives said their organi-
zations bave hiring practices
that attempt to select for qualities
related to ethical behavior.
Tbe financial executives seem to
agree that there should be no differ-
ence between one's personal and
business ethics. In today's atmos-
phere, it is no longer acceptable to
rationalize bad behavior by deferring
to the notion that "business is busi-
ness." A business model paradigm
shift — perhaps driven by growing
ethical awareness and social responsi-
bility — is occurring. The executives
in this study welcome a vision of
business in wbich integrity is not
something to be checked at the corpo-
11. rate door, but is an integral part of life
in and out of business, and a central
aspect of all financial decision-making
processes.
Medtronic's Ellis points out, "For
the most part, being involved in the
businesses is the right thing. 1 just
don't see any negatives to a business
partnering relationship. Where it
migbt have gotten a little out of kilter
is where the finance organization
came up with the deals that saved the
/ RATHER THAN
BELIEVING THAT INVESTOR
CONFIDENCE CAN
BE RESTORED BY EXTERNAL
REGULATION. THE
EXECUTIVES SEE THE
IMPORTANCE OF "STAYING
THE COURSE" AND "WALKING
THE WALK" AS THEIR
ORGANIZATIONS' ETHICAL
GATEKEEPER AND y
12. CONSCIENCE. _ ' .
quarter. If you look at the companies
that got in trouble, the 'deal-makers'
— the ones that were really coming
up with the "fiavor of the month
ideas" — were not assisting the busi-
nesses, but in almost all cases, were
creating a completely different busi-
ness. This is not business partnering."
Ellis asserts that the last thing
financial executives should do is
climb back into their financial silos.
"We will be much more successftil as
a profession in bringing back corpo-
rate America by being good business
partners, but doing so with integrity."
Fred Militello Jr. is a Senior Partner with
FinQuest Partners LLC, a Wall Street-
based financial consultancy practice, and
adjunct professor of finance and interna-
tional business at New York University's
Leonard N. Stern School of Business.
Dr. Michael Schwalbert is associated
with Hudson Vailey Psychology Associates
PLC. The complete study can be pur-
chased from the Financial Executives
Research Foundation at: www.fei.org/
rfbookstore, or 973.765.1033.
vwvw.fef.org January/February 2003 51
13. Research the aspects of company targets and define categories
such as industries, locations, specialties, job-related
opportunities, sources, and other characteristics that will help
identify company targets for you to promote your job interest.
Your company categories should provide details on where to
find additional targets.
Present your response as a mind map using MS Word or
www.MindMeister.com.
MindMeister is a free service that allows the creation of up to
six mind maps. To use this tool, complete the following steps:
1. Establish an account by choosing a user name and password.
2. Begin a mind map by clicking the Create a New Map button
on the home page.
3. Once inside the map screen, click the Help button to view a
short tutorial on using the interactive features of MindMeister.
4. Start with placing the main idea in the center.
5. Identify the ideas.
6. Develop each idea, adding more details to the mind map as
necessary.
7. You may invite your course instructor to view your map
online by entering his or her NCU e-mail address into the
invitation screen. She/he might make suggestions or changes in
your map to further guide your thinking.
8. To save a copy of your map, click the Export button at the
top of the work screen, and choose PDF or GIF as the export
version.
Then, prepare a written response that details and explains your
mind map. Include the following in your paper:
1. Determine which companies appear to provide the best
opportunities for your job interest.
14. 2. Identify the best sources to find more of these types of prime
companies.
3. Describe the best features and supply examples of the type of
company that fits your job search.
Support your paper with at least one scholarly resource. In
addition to these specified resources, other appropriate
scholarly resources, including older articles, may be included.
Length: 3-5pages, not including title and reference page (but
including your mind map)
Your paper should demonstrate thoughtful consideration of the
ideas and concepts presented in the course by providing new
thoughts and insights relating directly to this topic. Your
response should reflect scholarly writing and current APA
standards where appropriate.
The effect of financial constraints, investment policy,
product market competition and corporate governance
on the value of cash holdings
Howard W. H. Chan
a
, Yufei Lu
b
, Hong F. Zhang
b
a
Department of Finance, Faculty of Business and Economics,
15. University of Melbourne, Parkville,
VIC, Australia
b
School of Accounting, Economics and Finance, Faculty of
Business and Law, Deakin University,
Burwood, VIC, Australia
Abstract
This study empirically investigates the value shareholders place
on excess cash
holdings and how shareholders’ valuation of cash holdings is
associated with finan-
cial constraints, firm growth, cash-flow uncertainty and product
market competi-
tion for Australian firms from 1990 to 2007. Our results
indicate that the marginal
value of cash holdings to shareholders declines with larger cash
holdings and higher
leverage. However, firms that are more financially constrained,
that have higher
growth rates and that face greater uncertainty exhibit a higher
marginal value of
cash holdings. These findings are consistent with the
explanation that excess cash
holdings are not necessarily detrimental to firm value. Firms
with costly external
financing and that also save more cash for current operating and
future investing
needs find that the market values these cash hoarding policies
favourably. Finally,
there is limited evidence of an association between various
corporate governance
measures and the value of cash holdings for a shorter sample
16. period.
Key words: Financial constraints; Cash policy; Australian firms
JEL classification: G31, G32
doi: 10.1111/j.1467-629X.2011.00463.x
We thank Jim Psaros for the use of the Horwath Corporate
Governance data. Also, we
thank an anonymous Accounting and Finance reviewer, Robert
Faff (the editor), confer-
ence participants at the AsianFA 2011 annual meeting and the
AFAANZ 2011, and semi-
nar participants at the University of Newcastle and the
University of Queensland for their
helpful comments and suggestions.
Received 30 November 2010; accepted 19 November 2011 by
Robert Faff (Editor).
� 2011 The Authors
Accounting and Finance � 2011 AFAANZ
Accounting and Finance 53 (2013) 339–366
1. Introduction
Areexcess cash holdingsgood or bad? Inthe real world, excess
cash holdingsplay
a vital role as a cash buffer in corporate investment and
financing decisions. How-
ever,Jensen(1986)holdstheviewthatexcesscashholdingsaredetrim
entaltoshare-
17. holder value because managers waste the excess cash through
over-investment and
value-
destroyingacquisitions.Incontrast,havinglargecashholdingsprovi
desfirms
with flexibility in making investment decisions, as it avoids the
need to raise more
costlyexternalfinancing(Opleret
al.,1999;MikkelsonandPartch,2003).
A number of empirical studies, such as Mikkelson and Partch
(2003), Pinko-
witz and Williamson (2004), and Faulkender and Wang (2006),
investigate the
value of corporate cash holdings and how excess cash holdings
are related to
stock returns in US markets. In Australia, Lee and Powell
(2011) examine the
value of excess cash holdings. Their findings support the
agency cost argument
of excess cash holdings by showing that firms with a longer
duration of excess
cash holdings have a lower marginal value of cash. However,
Lee and Powell
(2011) only show how the marginal value of cash is related to
the persistence of
excess cash holdings.
Given the limited Australian evidence, the focus of this study is
on how share-
holders value excess cash holdings associated with financial
constraints, firm
growth opportunities, uncertainty in cash flows, product market
competition
and corporate governance.
18. 1
We first estimate the marginal value of cash holdings by
following the method-
ology in Faulkender and Wang (2006). In particular, we use
excess stock returns
as the dependent variable and unexpected changes in cash
holdings and firm
characteristics that are related to cash as the explanatory
variables. Excess stock
returns are calculated using returns from the 25 Fama and
French portfolios
formed on market capitalization (size) and book-to-market as
benchmark
returns.
2
Consistent with the results of Faulkender and Wang (2006),
firms with
larger cash holdings and higher leverage ratios generate a lower
marginal value
of cash holdings. When we employ dividend-paying ability and
book value of
total assets to partition our sample according to the degree of
financial con-
straints, we find that more financially constrained firms have a
significantly
higher marginal value of cash holdings. This indicates that
investors place greater
1
The Australian market differs from the US market. There are
more natural resources
firms and fewer technology-related firms, in terms of both
19. number and size. Natural
resource firms have more tangible assets in place as compared
to technology and internet-
related firms. Finally, Australian firms are generally smaller in
size and the Australian
market has a much smaller and less liquid corporate bond
market.
2
This approach follows Faulkender and Wang (2006). These
benchmark portfolios
formed on size and book-to-market account for the common risk
factors that affect stock
returns. In contrast, Lee and Powell (2011) use excess returns
adjusted by market or
industry returns instead of the 25 Fama and French portfolio
returns.
340 H. W. H. Chan et al./Accounting and Finance 53 (2013)
339–366
� 2011 The Authors
Accounting and Finance � 2011 AFAANZ
value on excess cash holdings in financially constrained firms,
as these firms are
less likely than unconstrained firms to gain access to external
capital.
To shed light on how the value of cash holdings is associated
with firms’
investment decisions, uncertainty in cash flows, product market
competition and
20. corporate governance, we further partition our sample using the
following vari-
ables: book-to-market for growth opportunities; average
volatility in earnings;
Herfindahl index constructed using the market share of a firm’s
sales within its
industry; and, finally, various corporate governance proxies. We
find that firms
with higher growth rates and higher levels of uncertainty in
their cash flows exhi-
bit a higher marginal value of cash holdings. However, product
market competi-
tion has little impact on firms’ value of cash holdings. Our
findings indicate that
internal financing has clear cost advantages over external
financing for firms with
high growth potential and those facing uncertain prospects.
Costly external
financing would force firms that are at a disadvantage to save
more cash for cur-
rent operating and future investing needs. Investors are aware of
these cash
hoarding policies and view them quite favourably. However,
within industry
product markets, competition seems to have little influence on a
firm’s cash
hoarding policy; for corporate governance, we find limited
evidence for its asso-
ciation with the value of cash holdings. Overall, our findings
are mainly consis-
tent with increased cash holdings being dependent on the firm’s
ability to access
external capital, as in the study of Hennessy and Whited (2005).
The remainder of this study is organized as follows. Section 2
examines the exist-
21. ingliterature,whichaimstodiscussthestudiessurroundingcorporate
cashholdings
and to link the cash-holding behaviour to various firm-specific
factors in Australia.
Section 3 discusses our empirical methodology and outlines our
main hypotheses.
The sample and summary statistics are described in Section 4.
Section 5 presents
ourempiricalresultsandrobustnesschecks.Section
6concludesthestudy.
2. Literature review
Opler et al. (1999) examine the determinants and implications
of cash holdings
and cash equivalents based on data from 1048 publicly traded
US firms during
the period 1971–1994. Their findings show that the level of
corporate cash hold-
ings is positively correlated with future investment
opportunities, cash-flow-to-
assets ratios, capital investment, industry volatility and
investments in fixed
assets and is negatively correlated with firm size, leverage, and
networking capi-
tal and dividend payments.
In a more recent paper, Faulkender and Wang (2006) extend this
line of
research by analysing the value that shareholders placed on the
cash held by a
firm.
3
These authors argue that the value of one additional dollar of
cash
22. 3
The focus of their paper is not on how much cash is saved out
of cash flow but on how
the shareholders would value this by examining their excess
stock returns.
H. W. H. Chan et al./Accounting and Finance 53 (2013) 339–
366 341
� 2011 The Authors
Accounting and Finance � 2011 AFAANZ
reserves should decline with larger cash holdings, higher
leverage and better
access to capital markets. Their empirical findings support all
of these argu-
ments, including the idea that excess cash holdings are more
valuable for share-
holders in financially constrained firms. On the other hand,
Pinkowitz and
Williamson (2004) examine the value placed on a firm’s cash
holdings under dif-
ferent growth scenarios. These authors find that investors
placed a higher value
on cash holdings of firms that had higher growth opportunities.
More recently, MacKay and Phillips (2005) investigate the
effect of product
market competition on a firm’s financial choices, in particular,
leverage. These
authors find that industry-related factors and financial choices
such as leverage
23. are jointly determined. In addition, they find that firms in
competitive industries
used less financial leverage than those in less competitive
industries. Fresard
(2010) examines directly the role of cash holdings in a firm’s
product market
decision-making. This author finds that cash holdings can be
used to support
competitive strategies against industry rivals. However, he does
not directly
investigate whether firms in competitive industries will retain
greater cash hold-
ings than those in less competitive industries, and he does not
examine whether
investors place a different value on excess cash holdings.
How corporate governance is associated with the value of cash
holdings has
also been explored both internationally and in the United States
Pinkowitz et al.
(2006) investigate how minority shareholders in countries with
poorer investor
protection value a firm’s cash holdings. These authors find that
a firm’s cash is
valued at a discount in countries with weaker investor rights,
because controlling
shareholders might use their position to extract private benefits
from cash hold-
ings. Dittmar and Mahrt-Smith (2007) document that
shareholders in the United
States assign a lower value to an additional dollar of cash
reserves when a firm
has a more entrenched management team or lower institutional
ownership.
These investigators argue that investors discount more heavily
the cash holdings
24. of a firm with a higher likelihood of having agency problems.
Finally, the main focus of Lee and Powell (2011) is to examine
the determi-
nants of the level of cash holdings in Australia. These authors
find results similar
to Opler et al. (1999). In addition, they investigate the value of
excess cash hold-
ings in Australia. They show that firms with a longer duration
of excess cash
holdings have a lower marginal value of cash. However, they do
not examine
how shareholders value cash holdings with respect to firm
growth, cash-flow
uncertainty and corporate governance.
3. Empirical methodology
This section outlines the baseline empirical model involved in
examining the
value of cash holdings for Australian firms, followed by a
discussion of the
impact of financial constraints, firm growth opportunities,
uncertainty in cash
flows, product market competition and corporate governance on
the marginal
value of cash holdings.
342 H. W. H. Chan et al./Accounting and Finance 53 (2013)
339–366
� 2011 The Authors
Accounting and Finance � 2011 AFAANZ
25. 3.1. Baseline empirical model
The primary goal of this study is to investigate the value
investors place on an
extra dollar of cash held by Australian firms and how various
factors that affect
a firm’s external financing conditions would alter this value.
Following Faulk-
ender and Wang (2006), we employ the following baseline
model to regress
excess stock returns over a fiscal year on the unexpected change
in various firm-
specific characteristics that affect cash positions in that fiscal
year. This is repre-
sented by the following:
ri;t � RBPi;t ¼ a0 þ b1
DCi;t
Mi;t�1
þ b2
DEi;t
Mi;t�1
þ b3
DNAi;t
Mi;t�1
þ b4
DRNDi;t
Mi;t�1
þ b5
DIi;t
Mi;t�1
26. þ b6
DDi;t
Mi;t�1
þ b7
Ci;t�1
Mi;t�1
þ b8Li;t þ b9
NFi;t
Mi;t�1
þ b10
Ci;t�1
Mi;t�1
�
DCi;t
Mi;t�1
þ b11Li;t
DCi;t
Mi;t�1
þ ei;t
ð1Þ
where D represents the change in the variable X of firm i
between fiscal year t
and t ) 1.
The dependent variable is excess stock return, where ri,t is
stock i’s annualized
return in fiscal year t and RBPi;t is annualized return of stock
i’s benchmark port-
27. folio during fiscal year t. The benchmark portfolio is based on
the whole sample
of the Australian Graduate School of Management (AGSM)
Share Price and
Price Relative (SPPR) database. We use the 25 Fama and French
(1993) portfo-
lios formed on market capitalization (size) and book-to-market
equity ratios as
benchmark portfolios. This is because Fama and French (1993)
find that size
and book-to-market proxy for common risk factors. By
controlling for these two
common risk proxies, any relationship found between excess
stock return and
cash holdings would not be attributed to common risk factors.
Ct is cash includ-
ing short-term deposits, Et is earnings before interest and tax
(EBIT), and NAt is
total book assets minus Ct. RNDt is capitalized research and
development
expenses, It is net interest expense, Dt is total common dividend
paid, Lt is total
debt divided by total book assets, and NFt is net changes in
total financing cash
flow. D is notation for the change of variables from fiscal year t
) 1 to t. All vari-
ables except Lt (leverage) and excess stock return are deflated
by the lagged mar-
ket value of equity (Mt)1). As indicated by Faulkender and
Wang (2006), this
methodology is a type of long-term event study that exploits
unexpected change
in firm-specific factors to explain abnormal returns.
Specifically, the change in
the value of cash reserves is the event, while the entire fiscal
year is defined as the
28. event window.
Our benchmark portfolios formed on size and book-to-market
equity ratios
may not be free from industry bias, because the US market is
quite different
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from the Australian stock market, which is characterized by a
high proportion
of resources firms the ASX. These resources firms are rich in
cash reserves, and
the time-series association between cash holdings and stock
returns is likely to be
volatile owing to the structural influence of the resources
sector. In addition,
Masulis et al. (2009) argue that the Faulkender and Wang
(2006) approach suf-
fers a potential endogeneity problem because a firm’s book-to-
market equity
ratio is endogenous. Therefore, we also use RBIi;t , industry
value-weighted annual-
ized benchmark returns, as in the study of Masulis et al. (2009),
where industries
are defined based on the AGSM Centre for Research in Finance
(CRIF) 26
industry classifications.
For our baseline regression, we estimate the pooled ordinary
least square
29. (OLS) regression model given by Equation (1) with year
dummies. We allow
residuals to be correlated within years by using the Huber–
White variance/
covariance matrix estimator to correct for potential
heteroscedasticity. Petersen
(2009) argues that both time effect and firm effect should be
properly dealt with
in a panel data set to mitigate estimation biases. Industry effects
are also impor-
tant for an Australian sample given that cash holdings are
particularly skewed
across resources industries. In robustness checks, we also re-
estimate our baseline
model using the industry fixed-effects model and the firm fixed-
effects model.
Our main results are qualitatively similar. For comparison with
the results
obtained in Faulkender and Wang (2006) and Lee and Powell
(2011), we use
pooled OLS in our baseline regressions.
3.2. Financial constraints and the value of cash
To examine the impact of financial constraints on the marginal
value of cash
holdings, we need to classify our sample into financially
constrained (FC) and
non-financially constrained (NFC) firms.
4
A firm is said to be FC if its cost of
external capital exceeds the cost of internal funds. However,
this definition does
30. not provide us with clear-cut guidance on identifying
constrained firms. Chang
et al. (2007) suggest that FC firms generally tend to have one or
more of the fol-
lowing characteristics: small or unprofitable, high growth
potential, high leverage
and low debt capacity. Standard corporate finance theory
suggests that smaller
firms are more financially constrained than larger firms. As a
result, we use an
approach similar to Chang et al. (2007). Our sample of firms is
evenly divided
into two groups according to their median book value of total
assets. We define
4
Some studies have used the KZ index (Kaplan and Zingales,
1997) to classify firms as
financially constrained (above-median KZ index) or
unconstrained (below-median KZ
index). The KZ index is constructed and based on a small
sample of 49 US firms; it may
not be appropriate for Australian firms. Nevertheless, and as a
robustness check, we use
the methodology from Kaplan and Zingales (1997) to partition
our sample into finan-
cially constrained and unconstrained firms. We find
qualitatively similar results to those
reported in this study. The results are not reported here but are
available upon request.
344 H. W. H. Chan et al./Accounting and Finance 53 (2013)
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31. Accounting and Finance � 2011 AFAANZ
below-median firms as FC firms and above-median firms as
NFC firms.
5
Smaller
firms are more likely to be financially constrained than larger
firms because they
are typically young and less known to the market. Smaller firms
are more likely
to encounter information asymmetry and agency problems,
which will make
their external financing more expensive.
Fazzari et al. (1988) used the dividend payout approach to
classify firms into
FC and NFC firms. They argue that owing to information
asymmetries in capi-
tal markets, FC firms have limited access to external financing.
As a result, FC
firms tend to retain most of their income. We follow Chang et
al. (2007) to parti-
tion our sample of firms into two groups according to their
dividend payout
ratios (as measured by dividend/EBIT). Non-dividend payers are
firms that do
not pay dividends and are more likely to be financially
constrained. Dividend
payers are those firms paying dividends in a particular year and
are viewed as
unconstrained.
6
32. We first follow Faulkender and Wang (2006) to test the follow-
ing hypothesis.
Hypothesis 1: The marginal value of cash holdings is negatively
associated with
the level of a firm’s cash position and the level of a firm’s
leverage. Investors in
financially constrained firms value excess cash holdings more
than those in non-
financially constrained firms.
3.3. Growth opportunities, uncertainty, product market
competition and the value
of cash
Firms with strong growth opportunities and investment needs
are likely to
hold more cash (Opler et al., 1999). As a result, investors value
cash holdings by
firms with good growth opportunities at a premium to those
with poor growth
opportunities (Pinkowitz and Williamson, 2004). We use book-
to-market ratios
(BTMs) as a proxy for investment opportunities to partition our
sample of firms
into two groups: a low BTM group and a high BTM group.
7
Hypothesis 2: Investors value excess cash holdings of firms
with higher growth
opportunities more than excess cash holdings of firms with
lower growth opportuni-
ties.
33. Firms facing higher uncertainty in their cash flows are likely to
hoard excess
cash in fear of future cash shortfalls. Firms with highly
uncertain cash flows
5
We also partition our sample of firms into tertiles (quintiles)
and then compare the low-
est tertile (quintile) with the highest tertile (quintile). Our
results still hold.
6
We do not use debt ratings as less than 5 per cent of firms in
our sample have debt rat-
ings. Also, during the majority of our sample period, there were
very few corporate debt
issues.
7
Using alternative proxies, such as growth in total assets, yield
quite similar results.
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face higher external funding costs when compared to internally
generated
funds. As a result, firms with a higher level of uncertainty are
expected to rely
34. more on internal funds and to save more cash. Opler et al.
(1999) find that
firms with high-risk cash flows generally hold relatively high
levels of cash. We
use the standard deviation of earnings ratios (as measured by
EBIT/total book
assets) for the past 5 years to proxy for uncertainty in cash
flows. Our sample
is partitioned into high-uncertainty and low-uncertainty groups
according to
their standard deviations of earnings ratios. We propose the
following
hypothesis.
Hypothesis 3: Investors value excess cash holdings of firms
with higher cash-flow
uncertainty more than excess cash flows of firms with lower
cash-flow uncertainty.
Finally, it has been argued in the literature by Phillips (1995),
MacKay and
Phillips (2005) and Fresard (2010) that intense product market
competition
affects firm financial choices. Firms in highly competitive
industries are more
likely to hoard more cash reserves as a buffer for their future
liquidity needs.
Therefore, firms with excess cash holdings are viewed
positively by stock mar-
ket investors. We use the Herfindahl–Hirschman index (HHI) as
a proxy for
product market competition. HHI is calculated by summing up
the squares of
the individual market shares by sales for firms in a specific
industry. In this
study, we use the CRIF 26 industry classifications to calculate
35. HHIs. Our sam-
ple is partitioned into high industry competition (with low
HHIs) and low
industry competition (with high HHIs) groups according to HHI
at the indus-
try level.
8
Hypothesis 4: Investors value excess cash holdings of firms in
highly competitive
industries more than excess cash holdings of firms in industries
with less competi-
tion.
3.4. Corporate governance and the value of cash
Firms with higher agency costs are likely to misuse their cash
reserves. So,
investors would value cash holdings less when controlling
shareholders might
have the opportunity to expropriate minority shareholders in
countries with
poorer shareholder protection (Pinkowitz et al., 2006). Even in
countries with
strong shareholder protection, shareholders are still concerned
about whether
managers will waste cash reserves, especially for firms with a
high level of
managerial entrenchment or for firms that lack investor
oversight by large
institutional shareholders (Dittmar and Mahrt-Smith, 2007). We
use two
8
We obtain similar results for Tables 4, 5, 6 and 7 when
36. comparing the lowest tertile
(quintile) with the highest tertile (quintile) by using tertile or
quintile partition. The results
are not reported but are available upon request.
346 H. W. H. Chan et al./Accounting and Finance 53 (2013)
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corporate governance measures to investigate their association
with the value of
cash holdings. These are the Horwath Corporate Governance
index (HCG index
hereafter) of Australian firms and the ownership of large
shareholders (block-
holders) in the firm.
9
3.4.1. HCG index
The Horwath Corporate Governance Report is a review of
Australian cor-
porate governance that was published annually from 2002 to
2006. The report
is based on annual report disclosures of Australia’s top 250
firms based on
market capitalization. The report intends to provide an overall
assessment of
each firm’s corporate governance structures and constructs a
star rating with a
37. maximum value of 5 and a relative corporate governance
ranking from 1 to
250. The fundamental focus of the report is to assess the
independence of a
firm’s board of directors and associated committees, including
audit commit-
tees, nomination committees and remuneration committees. The
report also
measures ‘the level of perceived independence of the firm from
the external
auditors, and disclosures relating to the existence of a code of
conduct, risk
management and share trading policy’. If a firm has a 5-star
rating, this indi-
cates the firm has outstanding corporate governance structures
and ‘the struc-
tures met all best practise standards and could not be faulted’. If
a firm is
assigned a 1-star rating, its corporate governance structures are
in very poor
condition and ‘almost without exception the board of directors
and the associ-
ated committees (where they existed) contained no independent
members’. We
employ both the Horwath star and ranking (from number 1, the
highest gover-
nance ranking, to 250, the lowest) measures in the value of cash
holdings
regressions.
3.4.2. Block holdings
We follow the study of Dittmar and Mahrt-Smith (2007) and use
the sum of
all ownership positions >5 per cent held by large investors as
our measure for
38. large shareholder monitoring. Prior research, such as the study
of Dlugosz et al.
(2004), indicates that large shareholders have more incentive to
monitor and
influence managers’ decisions, because they have a large capital
stake in the firm.
However, Pagano and Röell (1998) suggest that large
shareholders could end up
9
The Horwarth Governance index is published by the University
of Newcastle and is
viewed as an independent and reputable measure of corporate
governance by the media
and sections of the investment community. The index is publicly
available only for the
period 2002–2006. Blockholders are shareholders who own
more than 5 per cent of a
firm’s issued capital. These data are hand-collected from annual
reports with all nominee
holdings excluded.
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using their position for ex post opportunism and to expropriate
wealth from
minority shareholders.
Our regression model for the association between the value of
cash holdings
40. Ci;t�1
Mi;t�1
�
DCi;t
Mi;t�1
þ b11Li;t �
DCi;t
Mi;t�1
þ b12Govi;t
þ b13Govi;t �
DCi;t
Mi;t�1
þ ei;t
ð2Þ
where Govi,t represents corporate governance measures such as
the Horwath gov-
ernance star and ranking, or the ownership of blockholders. We
also follow Ditt-
mar and Mahrt-Smith (2007) to include corporate governance in
our analysis as
a binary dummy by splitting the sample into subgroups. For the
HCG index, a
firm with more than three stars is coded one (strong
governance) and less than
three stars is coded zero (weak governance), while firms with a
top 100 gover-
nance ranking are coded one and firms in the bottom 100 are
coded zero. For
block ownership, the highest tercile of ownership is coded one
41. (strong gover-
nance), while the lowest tercile of ownership is coded zero
(weak governance).
Dittmar and Mahrt-Smith (2007) argue that using a dummy
variable could allow
for more intuitive interpretation of the coefficients on the
interaction terms. This
also helps us to avoid difficulties in interpreting how changes in
governance
measures could lead to very different management independence
or investor
monitoring.
Hypothesis 5: Investors value excess cash holdings of firms
with strong corporate
governance mechanisms more than those of firms with weak
corporate governance
mechanisms.
4. Data
4.1. Sample selection
We start from a merged sample of firms listed on the ASX over
the
1990–2007 period with accounting data and stock return data
available from
the Aspect Financial Database and the Australian Graduate
School of Man-
agement Share Price and Price Relative (AGSM_SPPR)
database. Firms are
required to have no missing data for any of the following key
variables: cash,
348 H. W. H. Chan et al./Accounting and Finance 53 (2013)
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earnings before interest and tax, total book assets, net interest
expense, total
common dividend paid, total debt, monthly stock returns and
book value of
equity from fiscal year t ) 1 to t. We limit our sample to the 500
largest firms
listed on the ASX according to their market capitalizations in
the fiscal year
period. We also exclude firms in the financial and utilities
sector (with CRIF
industry code ‘18’, banks ‘20’, insurance ‘22’, real estate
investment trusts and
utilities ‘26’) owing to the relatively low physical capital
investment for finan-
cials and the regulated nature of utilities. Our sample consists
of 1108 individ-
ual firms and 6412 firm-year observations from 1990 to 2007.
10
All variables
have been winsorized at the 1st and 99th percentiles. This
approach reduces
the impact of extreme observations by assigning the cut-off
value to values
beyond the cut-off point.
11
The dependent variable in the baseline regression is excess
43. stock return.
Monthly stock returns are required to calculate individual stock
returns and
benchmark portfolio returns. Following Faulkender and Wang
(2006), we
use the 25 Fama and French (1993) portfolios formed on market
capitaliza-
tion (size) and BTM. In particular, for each fiscal year, we sort
firms into
25 size and BTM portfolios based on their market capitalization
and BTMs.
Then, excess stock returns are calculated by subtracting
annualized bench-
mark portfolio returns from annualized stock raw returns. We
also use the
industry value-weighted annualized benchmark return as in the
study of
Masulis et al. (2009) to examine whether our main results suffer
industry
bias.
In addition, we use two measures of corporate governance, the
independence
of corporate governance structures (the HCG) and the presence
of large share-
holders who monitor the firm. We sum all ownership positions
>5 per cent held
by blockholders. The HCG star and ranking measures are
manually collected
from the Horwath Corporate Governance Report. The original
Horwath Corpo-
rate Governance Report includes 1250 observations. Our final
sample drops to
557 observations after excluding firms in the financial and
utilities sectors. The
percentage ownership of blockholders is manually collected
44. from annual report
disclosures from Australia’s top 500 firms based on market
capitalization from
2000 to 2007. Our final blockholder sample has 1798
observations after exclud-
ing firms in the financial and utilities sectors and observations
with missing
values.
10
The minimum number of firms in any year is 221 (1990), and
the maximum is 404
(2002, 2007). The average (median) over this period is
approximately 356 (389) firms in a
year. The number of firm-year observations compares
favourably with the 5876 firm-year
observations over the same sample period for the study of Lee
and Powell (2011).
11
Our results are qualitatively very similar when we truncate the
distribution instead of
winsorizing it.
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4.2. Summary statistics
45. The summary statistics of the main variables are reported in
Table 1. As all
the explanatory variables except leverage ratio are scaled by the
1-year lagged
market value of equity, we interpret our variables as changes in
dollar value.
Table 1 indicates that, on average, earnings before interest and
taxes (Et), non-
cash book assets (NAt) and total common dividends paid (Dt)
increase over the
sample period, as both their mean and median values are
positive.
Panel A of Table 2 reports summary statistics of firms in our
sample after
we classify them into as constrained (FC) or unconstrained
(NFC). Accord-
ing to size and dividend payout, a FC firm has on average a
higher annual-
ized excess return, a higher change in cash holdings, a higher
level of cash
holdings, higher leverage and higher change in financing cash
flow than does
a NFC firm. Similarly, Panel B of Table 2 indicates that firms
with lower
BTM (higher growth opportunities) and higher level of cash-
flow uncertainty
have higher annualized excess returns, higher changes in cash
holdings and
higher changes in financing cash flow. However, firms in highly
competitive
industries have lower annualized excess returns, lower changes
in cash
Table 1
46. Sample summary statistics (1990–2007)
Variable Observations Mean Median SD Min Max
Ri;t � RBPi;t 6412 0.0476 )0.0416 0.7021 )1.9737 3.4540
Ri;t � RBIi;t 6412 0.2138 0.0278 0.7796 )0.9353 4.2872
DCt 6412 0.0390 0.0033 0.2166 )0.8363 1.5223
Ct)1 6412 0.1177 0.0547 0.2127 0 2.0023
DEt 6412 0.0246 0.0107 0.1800 )1.0969 1.6511
DNAt 6412 0.2371 0.0907 0.8052 )3.6493 5.8598
DIt 6412 0.0002 )0.0001 0.0335 )0.1676 0.2463
DDt 6412 0.0078 0.0015 0.029 )0.1025 0.1342
Lt 6412 0.1939 0.1862 0.1658 0 0.8669
NFt 6412 0.0911 )0.0012 0.4551 )1.1248 3.3568
Accounting data are obtained from the Aspect Financial
Database, and stock returns are obtained
from the AGSM_SPPR Database for fiscal years 1990–2007.
Firms are required to have available
information for all key variables needed in the study and to be
among the top 500 largest firms listed
in the ASX according to market capitalization in the study
period. Ri;t �RBPi;t and Ri;t � R
BI
i;t are
excess stock returns, where Ri,t is the annualized stock return
of firm i in fiscal year t, Ri;t �RBPi;t is
stock i’s annualized benchmark portfolio return in fiscal year t
calculated on value-weighted returns
47. of 25 portfolios formed on size and book-to-market (5 · 5) as in
the study of Fama and French
(1993), and Ri;t � RBIi;t is industry value-weighted annualized
benchmark return as in the study of
Masulis et al. (2009). All variables except Lt (leverage) and
excess stock return are deflated by the
lagged market value of equity (Mt)1). Ct is cash including
short-term deposits; Et is earnings before
interest and tax; and NAt is total book assets minus Ct; It is net
interest expense; Dt is total common
dividend paid; Lt is total debt divided by total book assets, and
NFt is net changes in total financing
cash flow. D is notation for the change of variables from fiscal
year t ) 1 to t.
350 H. W. H. Chan et al./Accounting and Finance 53 (2013)
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T
a
b
le
2
F
in
77. )
0
.0
4
5
*
*
*
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366 351
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T
a
b
le
2
(c
o
n
ti
n
u
ed
)
P
a
n
el
122. holdings and slightly lower level of cash holdings.
12
Panel C of Table 2 indi-
cates that firms with strong corporate governance measures have
higher
changes in cash holdings. However, the differences between
strong and weak
corporate governance firms are statistically significant only for
the block-
holder ownership measure and not for the HCG star and ranking
measures.
To summarize, summary statistics and univariate analyses
indicate that
financially constrained firms, firms with higher growth
opportunities, firms
with higher uncertainty and firms with lower industry
competition exhibit
higher annualized excess returns and hold more excess cash.
Firms with
higher blockholder ownership are associated with lower
annualized excess
returns and hold less excess cash. This evidence provides initial
support for
our hypotheses.
5. Empirical results
5.1. The marginal value of cash holdings
Table 3 presents estimates from the baseline model for the
entire sample using
the pooled OLS regression. The initial coefficient estimates on
the changes in
cash holdings are statistically significant and positive at the 1
123. per cent level. This
suggests that an additional dollar of cash corresponds to
AU$0.726 as valued by
shareholders (Column (1)). The estimated coefficients on the
other control vari-
ables have the expected signs and are largely consistent with
those reported in
Faulkender and Wang (2006) and Lee and Powell (2011). In
particular, the coef-
ficients on changes in earnings, changes in dividends and level
of cash holdings
are positive and significant in all four columns. Further, the
estimated coeffi-
cients are qualitatively similar when the following interaction
terms are both
included in the estimation: change in cash with the level of cash
holdings
(Ct)1 * DCt) and the leverage ratio with the level of cash
holdings (Lt * DCt).
Based on the estimation in Column (2), the marginal value of
cash to investors
in the mean firm is equal to AU$0.867 (= AU$1.095 + ()0.471
* 0.1177) + ()0.891 * 0.1939)) for a firm with a 11.77 per cent
level of cash to
market value of equity and a 19.39 per cent leverage ratio. This
result is consis-
tent with Hypothesis 1 that the marginal value of cash holdings
is negatively
associated with the level of a firm’s cash position and the level
of a firm’s lever-
age ratio. Columns (3) and (4) use alternative excess stock
returns, the annual-
ized industry-adjusted excess returns. The results are very
similar to those in
12
124. In the literature, there is no direct empirical evidence on
whether firms in highly com-
petitive industries would hold more or less cash. MacKay and
Phillips (2005) investigate
only the association between industry competition and leverage.
In Panel B, the leverage
ratios for highly competitive industries are slightly lower than
those for less competitive
industries. This is consistent with MacKay and Phillips (2005).
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Columns (1) and (2) using the 25 Fama and French (1993)
portfolios’ adjusted
excess returns.
5.2. Financial constraints and the value of cash holdings
Table 4 presents the estimated results for the association
between financial
constraints and the value of cash holdings. Columns (1) and (2)
of Table 4 con-
tain the regression results for the dividend payout groupings.
Non-dividend pay-
ers (FC) exhibit a higher value of cash holdings than dividend
payers (NFC).
Columns (4) and (5) report results obtained by using firm book
value of assets as
the measure of financial constraints. Similarly, small firms (FC)
126. included
Yes Yes Yes Yes
Observations 6412 6412 6412 6412
R
2
0.13 0.14 0.18 0.19
This table presents the results of regressing the excess stock
return on changes in firm characteristics,
including interaction terms, between cash and leverage over the
fiscal year. Ri;t � RBPi;t and Ri;t �RBIi;t
are the excess stock returns, where Ri,t is the annualized stock
return of firm i in fiscal year t;
Ri;t � RBPi;t is stock i’s annualized benchmark portfolio return
in fiscal year t calculated on value-
weighted returns of 25 portfolios formed on size and book-to-
market (5 · 5) as in the study of Fama
and French (1993); and Ri;t � RBIi;t is industry value-weighted
annualized benchmark return as in the
study of Masulis et al. (2009). All variables except Lt
(leverage) and excess stock return are deflated
by the lagged market value of equity (Mt)1). Ct is cash
including short-term deposits; Et is earnings
before interest and tax; NAt is total book assets minus Ct; RNDt
are capitalized research and develop-
ment expenses; It is net interest expense; Dt is total common
dividends paid; Lt is total debt divided
127. by total book assets; and NFt is net changes in total financing
cash flow. All variables are winsorized
at the 1st and 99th percentiles. This approach reduces the
impact of extreme observations by assign-
ing the cut-off value to values beyond the cut-off point. t-
statistics significant at the 10, 5 and 1 per
cent levels are designated with *, ** and ***, respectively.
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value of cash holdings than large firms (NFC). On average, the
marginal value
of cash holdings for small firms is AU$1.056 (= AU$1.213 +
()0.765 *
0.120) + ()0.479 * 0.135)), while the marginal value of cash
holdings for large
firms is AU$0.501 (= AU$0.701 + ()0.178 * 0.116) + ()0.708 *
0.253)). The
value difference for an additional dollar of cash holdings is
AU$0.555. The
coefficients on the change in cash are statistically different
across FC and NFC
Table 4
Regression results for financial constraints
129. )0.070*** ()2.59)
Ct)1 * DCt )0.667*** ()5.77) )0.001 ()0.01) )0.765*** ()6.23)
)0.178*** ()2.79)
Lt * DCt )0.782** ()2.39) )0.022 ()0.07) )0.479 ()1.05)
)0.708*** ()3.64)
Intercept )0.199* ()1.94) )0.154 ()1.19) )0.302*** ()4.36) 0.046
(1.28)
Year dummy
included
Yes Yes Yes Yes
Observations 2081 4331 3211 3201
R
2
0.17 0.17 0.17 0.12
Difference
between FC
and NFC firms
(v2 of Chow test)
123.40*** 92.16***
This table presents the results of regressing the excess stock
return Ri,t ) RBi,t on changes in firm
characteristics for firms with and without financial constraints
over the fiscal year. The baseline
model is a pooled ordinary least square model controlling for
130. time effect. All variables except Lt
(leverage) and excess stock return are deflated by the lagged
market value of equity (Mt)1). Ct is cash
including short-term deposits; Et is earnings before interest and
tax; NAt is total book assets minus
Ct; RNDt is capitalized research and development expenses; It
is net interest expense; Dt is total com-
mon dividend paid; Lt is total debt divided by total book assets;
and NFt is the net changes in total
financing cash flow. All variables are winsorized at the 1st and
99th percentiles. This approach
reduces the impact of extreme observations by assigning the
cut-off value to values beyond the cut-
off point. t-statistics significant at the 10, 5 and 1 per cent
levels are designated with *, ** and ***,
respectively.
H. W. H. Chan et al./Accounting and Finance 53 (2013) 339–
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groups (P-values reported in Table 4 are <0.05).
13
This implies that investors
131. place a significantly higher value on an extra dollar of cash
holdings for finan-
cially constrained firms, because it is more difficult for these
firms to access exter-
nal financing. These results support Hypothesis 1.
5.3. Growth opportunities, uncertainty and product market
competition
To investigate whether growth opportunities, uncertainty in
cash flows and
product market competition affect the value of cash holdings in
a way similar to
financial constraints, we use BTMs (proxy for growth
opportunities), standard
deviation of earnings (proxy for cash-flow uncertainty) and the
HHI (proxy for
product market competition) to partition our sample. Table 5
reports results for
the association between growth opportunities and the value of
cash holdings.
Low-growth firms have a lower value of cash holdings than
high-growth firms.
On average, the marginal value of cash holdings for low-growth
firms is
AU$0.675 (= AU$0.828 + ()0.225 * 0.120) + ()0.630 * 0.200)),
while the
marginal value of cash holdings for high-growth firms is
AU$0.979 (=
AU$1.233 + ()0.741 * 0.116) + ()0.897 * 0.187)). The dollar
value difference
is AU$0.304 per additional dollar of cash holdings. The
coefficients on the
change in cash are statistically different between low-growth
and high-growth
132. groups (reported P-values <1 per cent). This confirms
Hypothesis 2 that inves-
tors value excess cash holdings of firms with high sales growth
rates more than
those of firms with low sales growth rates.
The results for the association between cash-flow uncertainty
and the value of
cash holdings are presented in Table 6. It is evident from the
table that firms
with high uncertainty of cash flows exhibit higher value of cash
holdings than
firms with low uncertainty. On average, the marginal value of
cash holdings for
high-uncertainty firms is AU$1.014 (= AU$1.207 + ()0.410 *
0.127) +
()0.856 * 0.165)), while the marginal value of cash holdings for
low-uncertainty
firms is AU$0.626 (= AU$0.799 + ()0.399 * 0.108) + ()0.585 *
0.222)). The
P-values for the coefficient tests on the change in cash show
that the two group
coefficients are significantly different. The results support
Hypothesis 3 that firms
with high cash-flow uncertainty have higher marginal value in
excess cash hold-
ings than firms with low cash-flow uncertainty.
Table 7 reports results for the association between product
market competi-
tion and the value of cash holdings. In contrast to the findings
for sales growth
and cash-flow uncertainty, product market competition seems to
have little influ-
ence on the value of excess cash holdings. The coefficients on
the change in cash
133. do not statistically differ between more competitive and less
competitive groups
13
In additional analysis, we perform a Chow test to see whether
the model estimation dif-
fers statistically across these two financial constraint groups.
The statistics in the last row
of Table 4 show that the differences between the constrained
and the non-constrained for
dividend payout ratios are statistically significant with P-values
of <1 per cent.
356 H. W. H. Chan et al./Accounting and Finance 53 (2013)
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(P-values reported are more than 15 per cent). However, when
we calculate the
difference in the value of excess cash holdings, the marginal
value of cash hold-
ings for firms in highly competitive industries (AU$0.878 =
AU$1.167 +
()0.367 * 0.114) + ()1.292 * 0.191)) is slightly higher than the
marginal value
of cash holdings for firms in industries with less competition
(AU$0.804 =
AU$0.986 + ()0.527 * 0.121) + ()0.602 * 0.197)).
5.4. Corporate governance and value of cash holdings
134. To investigate whether corporate governance affects the value
of cash hold-
ings, we first employ HCG stars (HWS, from 1 star to 5 stars,
representing weak
to strong corporate governance structures) and HCG rankings
(HWR, from 1,
Table 5
Regression results for growth opportunities
Variables High book-to-market (HBM) Low book-to-market
(LBM)
DCt 0.828*** (9.75) 1.233*** (14.28)
P-value (HBM ) LBM „ 0) 0.00
DEt 0.472*** (7.47) 0.423*** (5.85)
DNAt 0.073*** (3.91) 0.019 (0.96)
DRNDt )2.487** ()2.39) 0.500 (0.41)
DIt 1.485*** (4.94) 0.945** (2.10)
DDt 1.034*** (3.17) 0.442 (0.95)
Ct)1 0.313*** (7.02) 0.598*** (8.28)
P-value (HBM ) LBM „ 0) 0.00
Lt )0.149** ()2.51) )0.302*** ()3.58)
NFt 0.050 (1.27) 0.053 (1.45)
Ct)1 * DCt )0.225*** ()2.70) )0.741*** ()6.54)
Lt * DCt )0.630** ()2.57) )0.897*** ()2.70)
Intercept )0.060 ()1.33) )0.170*** ()2.63)
Year dummy included Yes Yes
Observations 3211 3201
R
2
135. 0.11 0.16
Difference between HBM
and LBM firms
(v2 of Chow test)
42.90***
This table presents the results of regressing the excess stock
return Ri,t ) RBi,t on changes in firm
characteristics for firms with different book-to-market ratios
over the fiscal year. The baseline model
is a pooled ordinary least square model controlling for time
effect. All variables except Lt (leverage)
and excess stock return are deflated by the lagged market value
of equity (Mt)1). Ct is cash including
short-term deposits; Et is earnings before interest and tax; NAt
is total book assets minus Ct; RNDt is
capitalized research and development expenses; It is net interest
expense; Dt is total common dividend
paid; Lt is total debt divided by total book assets; and NFt is the
net changes in total financing cash
flow. All variables are winsorized at the 1st and 99th
percentiles. This approach reduces the impact
of extreme observations by assigning the cut-off value to values
beyond the cut-off point. t-statistics
136. significant at the 10, 5 and 1 per cent levels are designated with
*, ** and ***, respectively.
H. W. H. Chan et al./Accounting and Finance 53 (2013) 339–
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highest, to 250, lowest). Table 8 reports results for the
association between the
HCG index and the value of cash holdings. The coefficients for
HWS, HWR
and their interactions with excess cash holdings have the
expected signs but are
not statistically significant, except for HWR * DCt, which has
marginal signifi-
cance. The negative coefficient of HWR * DCt indicates that the
stronger the
HCG (high HWR represents weak governance), the higher the
value of excess
cash holdings, which is consistent with Hypothesis 5.
Columns (1) and (2) of Table 9 report the results for the
ownership of large
shareholders and the value of cash holdings. BlockHolding is
the sum of all per-
centage ownership of blockholders. BlockDummy equals 1 if a
firm is in the high-
est tercile of ownership (strong governance) and zero if a firm
in the lowest
tercile of ownership (weak governance). As shown in Table 9,
both coefficients
137. on BlockHolding and BlockDummy are negative and significant,
suggesting
Table 6
Regression results for cash-flow uncertainty
Variables Low uncertainty (LUC) High uncertainty (HUC)
DCt 0.799*** (10.92) 1.207*** (13.09)
P-value (LUC ) HUC „ 0) 0.08
DEt 0.183* (1.95) 0.471*** (7.23)
DNAt 0.024 (1.58) 0.042** (2.01)
DRNDt )3.464*** ()2.98) 0.320 (0.28)
DIt 1.145*** (4.17) 0.920** (2.14)
DDt 0.274 (0.96) 1.310*** (2.79)
Ct)1 0.215*** (6.05) 0.705*** (9.23)
P-value (LUC ) HUC „ 0) 0.00
Lt )0.218*** ()4.30) )0.238*** ()2.66)
NFt 0.076*** (2.59) 0.037 (0.89)
Ct)1 * DCt )0.399*** ()5.87) )0.410*** ()3.38)
Lt * DCt )0.585*** ()2.86) )0.856** ()2.43)
Intercept )0.073** ()1.97) )0.161** ()2.31)
Year dummy included Yes Yes
Observations 3211 3201
R
2
0.10 0.17
Difference LUC and HUC
138. firms (v2 of Chow test)
67.89***
This table presents the results of regressing the excess stock
return Ri,t ) RBi,t on changes in firm
characteristics for firms with different cash-flow uncertainty
over the fiscal year. The baseline model
is a pooled ordinary least square model controlling for time
effect. All variables except Lt (leverage)
and excess stock return are deflated by the lagged market value
of equity (Mt)1). Ct is cash including
short-term deposits; Et is earnings before interest and tax; NAt
is total book assets minus Ct; RNDt is
capitalized research and development expenses; It is net interest
expense; Dt is total common dividend
paid; Lt is total debt divided by total book assets; and NFt is net
change in total financing cash flow.
All variables are winsorized at the 1st and 99th percentiles. This
approach reduces the impact of
extreme observations by assigning the cut-off value to values
beyond the cut-off point. t-statistics sig-
nificant at the 10, 5 and 1 per cent levels are designated with *,
** and ***, respectively.
358 H. W. H. Chan et al./Accounting and Finance 53 (2013)
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139. Accounting and Finance � 2011 AFAANZ
investors put less value on the excess cash held by firms with
higher blockholder
ownership. Our results are inconsistent with Hypothesis 5 and
results docu-
mented in the United States by Dittmar and Mahrt-Smith (2007).
14
When a firm
holds more excess cash, investors discount the value of that
cash holding. A pos-
sible reason for this is concerns over potential expropriation or
ex post oppor-
tunism by large shareholders (Pagano and Röell, 1998). As the
proportion
of blockholder ownership increases, there is a higher probability
for ex post
Table 7
Regression results for industry competition
Variables High industry competition (HIC) Low industry
competition (LIC)
DCt 1.167*** (14.73) 0.986*** (10.85)
P-value (HIC ) LIC „ 0) 0.15
DEt 0.356*** (5.96) 0.564*** (7.41)
DNAt 0.079*** (4.61) 0.012 (0.60)
DRNDt 0.548 (0.51) )1.453 ()1.21)
DIt 0.944*** (3.03) 1.424*** (3.23)
DDt 0.816** (2.34) 0.715 (1.59)
140. Ct)1 0.388*** (7.90) 0.416*** (6.39)
P-value (HIC ) LIC „ 0) 0.75
Lt )0.213*** ()3.26) )0.261*** ()3.34)
NFt )0.031 ()0.94) 0.150*** (3.61)
Ct)1 * DCt )0.367*** ()4.46) )0.527*** ()4.70)
Lt * DCt )1.292*** ()4.72) )0.602** ()2.03)
Intercept )0.155*** ()3.16) )0.064 ()1.04)
Year dummy included Yes Yes
Observations 3211 3201
R
2
0.15 0.14
Difference between HIC
and LIC firms
(v2 of Chow test)
26.07
This table presents the results of regressing excess stock return
Ri,t-RBi,t on changes in firm character-
istics for firms with different industry competition provided by
the Herfindahl index over the fiscal
year. The baseline model is a pooled ordinary least square
model controlling for time effect. All vari-
ables except Lt (leverage) and excess stock return are deflated
by the lagged market value of equity
141. (Mt)1). Ct is cash including short-term deposits; Et is earnings
before interest and tax; NAt is total
book assets minus Ct; RNDt is capitalized research and
development expenses; It is net interest
expense; Dt is total common dividend paid; Lt is total debt
divided by total book assets; and NFt is
the net change in total financing cash flow. All variables are
winsorized at the 1st and 99th percen-
tiles. This approach reduces the impact of extreme observations
by assigning the cut-off value to val-
ues beyond the cut-off point. t-statistics significant at the 10, 5
and 1 per cent levels are designated
with *, ** and ***, respectively.
14
Unlike in studies of the United States, the blockholding type
cannot be perfectly identi-
fied from the data that we manually collected from the annual
reports. This is one possi-
ble limitation in our blockholding analysis.
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142. opportunism to occur. Under the imputation tax system with a
preference for
fully franked dividends, non-blockholder shareholders are more
likely to prefer
that excess cash be paid out as dividends.
We also investigate how the HCG index and blockholder
ownership
together are associated with the value of excess cash holdings in
Columns (3)
and (4) of Table 9.
15
The results are largely consistent with using the two
measures separately. Taken together, we find limited evidence
on the associa-
tion between corporate governance and the value of excess cash
holdings in
Australia.
Table 8
Regression results with Horwath Corporate Governance index
Variables (1) (2) (3) (4)
DCt 0.513*** (1.60) 1.307*** (4.04) 0.873*** (5.02) 1.289***
(5.88)
DEt 0.839*** (6.03) 0.874*** (6.27) 0.839*** (4.62) 0.847***
(4.28)
DNAt 0.129*** (3.39) 0.126*** (3.32) 0.173*** (3.08)
0.352*** (4.55)
DRNDt 1.446 (0.89) 1.444 (0.89) 0.947 (0.49) )0.358 ()0.13)
DIt 0.795 (1.06) 0.825 (1.10) 1.341 (1.39) 0.271 (0.24)
143. DDt 0.856 (1.54) 0.846 (1.53) 1.275* (1.82) 0.790 (1.01)
Ct)1 0.460*** (3.94) 0.467*** (3.99) 0.438*** (2.60) 0.611***
(3.06)
Lt 0.005 (0.06) 0.008 (0.09) 0.033 (0.30) 0.095 (0.77)
NFt )0.164** ()2.28) )0.163** ()2.27) )0.175* ()1.73) )0.414***
()2.95)
Ct)1 * DCt )0.149 ()0.52) )0.207 ()0.72) 0.561 (1.34) 0.477
(0.76)
Lt * DCt )0.223 ()0.44) )0.249 ()0.51) )2.451*** ()3.37)
)4.019*** ()4.16)
HWS 0.02 (1.32) 0.032 (0.90)
HWR 0.001 (1.16) 0.056 (1.34)
HWS * DCt 0.111 (1.01) 0.322 (1.18)
HWR * DCt )0.003* ()1.70) )0.043 ()0.11)
Observations 938 938 557 427
R
2
0.14 0.15 0.16 0.21
This table presents the results of regressing excess stock return
Ri,t-RBi,t on changes in firm character-
istics for firms with strong and weak corporate governance
measures over the fiscal year. The baseline
model is a pooled ordinary least square model controlling for
time effect. All variables except Lt
(leverage) and excess stock return are deflated by the lagged
market value of equity (Mt)1). Ct is cash
144. including short-term deposits; Et is earnings before interest and
tax; NAt is total book assets minus
Ct; RNDt is capitalized research and development expenses; It
is net interest expense; Dt is total com-
mon dividend paid; Lt is total debt divided by total book assets;
NFt is net changes in total financing
cash flow; HWS is the Horwath star rating; and HWR is
Horwath ranking of corporate governance.
All variables are winsorized at the 1st and 99th percentiles. This
approach reduces the impact of
extreme observations by assigning the cut-off value to values
beyond the cut-off point. t-statistics sig-
nificant at the 10, 5 and 1 per cent levels are designated with *,
** and ***, respectively.
15
For this analysis, we restrict the blockholder ownership data to
the period 2002–2006.
360 H. W. H. Chan et al./Accounting and Finance 53 (2013)
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5.5. Robustness checks
The results reported in the preceding sections are obtained using
146. HWR 0.053 (0.98)
HWSD * DCt 0.341 (1.13)
HWRD * DCt )0.304 ()0.69)
BlockHolding * DCt )0.610* ()1.91)
BlockDummy * DCt )0.327* ()1.65) )0.826*** ()2.66) )0.616
()1.57)
Observations 1798 1201 375 288
R
2
0.16 0.12 0.18 0.21
This table presents the results of regressing the excess stock
return Ri,t-RBi,t on changes in firm char-
acteristics for firms with strong and weak corporate governance
measures over the fiscal year. The
baseline model is a pooled ordinary least square model
controlling for time effect. All variables except
Lt (leverage) and excess stock return are deflated by the lagged
market value of equity (Mt)1). Ct is
cash including short-term deposits; Et is earnings before
interest and tax; NAt is total book assets
minus Ct; RNDt is capitalized research and development
expenses; It is net interest expense; Dt is total
common dividend paid; Lt is total debt divided by total book
assets; and NFt is net changes in total
financing cash flow. HWSD is a dummy variable for the
147. Horwath star rating. A firm with more than
three stars is coded as 1 (strong governance) and less than three
stars as zero (weak governance).
HWRD is a dummy variable for the Horwath ranking, while
firms with top 100 governance ranking
are coded as 1 and those in the bottom 100 are coded as zero.
BlockHolding is the sum of all owner-
ship positions >5 per cent held by large shareholders.
BlockDummy is a dummy variable where the
highest tercile of ownership is coded as 1 (strong governance),
and the lowest tercile of ownership is
coded as zero (weak governance). All variables are winsorized
at the 1st and 99th percentiles. This
approach reduces the impact of extreme observations by
assigning the cut-off value to values beyond
the cut-off point. t-statistics significant at the 10, 5 and 1 per
cent levels are designated with *, ** and
***, respectively.
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148. data set are biased. The literature advocates the firm fixed-
effects model to con-
trol for unobservable time-invariant firm heterogeneity (for
example, Himmel-
berg et al., 1999). It is possible that the effect of changes in
cash on excess stock
returns is caused by some unobserved firm-specific factor(s). In
addition, indus-
try effects are important for an Australian sample given that
resources industries
are likely to harbour more cash. We employ both the firm fixed-
effects model
and the industry fixed-effects model to check the robustness of
our findings using
the pooled OLS regressions in Table 3. The results are reported
in Table 10.
Consistent with the results estimated using the pooled OLS
approach, the main
estimated coefficients have the same predicted signs and
magnitudes. This sug-
gests that using alternative estimation approaches would
generate qualitatively
similar results.
In all our excess-return model specifications, the dependent
variable is defined
as excess stock returns, while the other variables are scaled by
the lagged market
value of equity. This allows us to interpret our findings as to
how investors value
Table 10
Robustness checks
Variables Industry fixed effects Industry fixed effects Firm
150. 0.14 0.15 0.37 0.38
This table presents the results of regressing the excess stock
return Ri,t ) R_BPi,t on changes in firm
characteristics using an industry fixed-effects model and a firm
fixed-effects model over the fiscal year.
All variables except Lt (leverage) and excess stock return are
deflated by the lagged market value of
equity (Mt)1). Ct is cash including short-term deposits; Et is
earnings before interest and tax; NAt is
total book assets minus Ct; RNDt is capitalized research and
development expenses; It is net interest
expense; Dt is total common dividend paid; Lt is total debt
divided by total book assets; and NFt is
net changes in total financing cash flow. All variables are
winsorized at the 1st and 99th percentiles.
This approach reduces the impact of extreme observations by
assigning the cut-off value to values
beyond the cut-off point. t-statistics significant at the 10, 5 and
1 per cent levels are designated with
*, ** and ***, respectively.
362 H. W. H. Chan et al./Accounting and Finance 53 (2013)
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151. excess cash holdings in dollar terms. In the empirical literature,
an alternative
approach is to scale by the total book value of assets. To check
the robustness of
our findings, we next employ a value regression as outlined in
Fama and French
(1998). We use changes in market value over total book value of
assets as the
dependent variable and variables likely to affect the firms’
future cash flows
(scaled by total book value of assets) as the explanatory
variables. Specifically,
we estimate the following regression for each measure of our
financial constraint
proxies, BTMs, cash-flow volatility, industry competition and
corporate gover-
nance measures:
Mi;t � Ai;t
Ai;t
¼ a0 þb1
Ei;t
Ai;t
þ b2
dEi;t
Ai;t
þ b3
dEi;tþ2
Ai;t
153. þ b13
dDi;t
Ai;t
þ b14
dDi;tþ2
Ai;t
þ b15
dMi;tþ2
Ai;t
þ b16
DCi;t
Ai;t
þ ci;t
ð3Þ
where d Xt represents the 2-year change in the variable X, Xt )
Xt)2; Mt is total
market value of assets; At is total book value of assets; Et is
earnings before
interest and tax (EBIT); RNDt is capitalized research and
development expenses;
It is net interest expense; Dt is total common dividend paid; and
Ct is cash includ-
ing short-term deposits. All variables are deflated by the total
book value of
assets (At) as in the study of Fama and French (1998). For
brevity, we report
only the estimated coefficients on DCt (b16) for the whole
sample and for each
measure of our financial constraints proxies, BTMs, cash-flow
volatility, industry
154. competition and corporate governance measures. Consistent
with the results esti-
mated using the stock return specification, the main estimated
coefficients have
the same predicted signs and magnitudes. This further confirms
our main
hypotheses that more financially constrained firms and firms
with higher growth
opportunities, higher product market competition, higher levels
of uncertainty in
cash flows, stronger HCG measures, and lower levels of
blockholder ownership
exhibit significantly higher market value (Table 11).
6. Conclusions
In this study, we investigate whether financial constraints,
firms’ growth
opportunities, uncertainty in cash flows and product market
competition affect
the value of cash holdings in the Australian context. We find
that more finan-
cially constrained firms have significantly higher marginal
value of cash holdings.
This indicates that investors value excess cash holdings of
financially constrained
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firms more than unconstrained firms. Further, firms with higher
155. growth rates
and with higher levels of uncertainty in their cash flows exhibit
a higher marginal
value of cash holdings. However, product market competition
has little impact
Table 11
Regression results for the market value of assets
DCt Observations R
2
Panel A: Ordinary least square regressions
Whole sample 1.520*** (5.43) 4941 0.31
Non-dividend payers 0.859** (2.44) 1577 0.45
Dividend payers 0.765** (2.45) 3364 0.54
Small firms 1.248*** (3.85) 2476 0.36
Large firms 0.925** (2.37) 2465 0.35
Low BTM ratio 1.056*** (3.37) 2516 0.41
High BTM ratio 0.232*** (2.93) 2425 0.33
High cash-flow volatility 1.241*** (2.77) 2503 0.18
Low cash-flow volatility 1.157*** (3.57) 2438 0.38
High industry competition 2.318*** (5.05) 2438 0.34
Low industry competition 0.831** (2.44) 2503 0.37
156. High Horwath ranking 0.176 (0.09) 124 0.60
Low Horwath ranking 1.214 (0.96) 189 0.52
High block ownership 0.002 (0.00) 402 0.36
Low block ownership 2.207* (1.88) 395 0.50
Panel B: Industry fixed-effects regression
Whole sample 1.210*** (7.35) 4941 0.43
Non-dividend payers 0.800*** (2.98) 1577 0.50
Dividend payers 0.688*** (3.90) 3364 0.59
Small firms 1.058*** (4.59) 2476 0.44
Large firms 0.737*** (3.82) 2465 0.46
Low BTM ratio 0.952*** (4.23) 2516 0.46
High BTM ratio 0.187*** (3.29) 2425 0.37
High cash-flow volatility 1.056*** (5.38) 2503 0.33
Low cash-flow volatility 0.995*** (4.27) 2438 0.46
High industry competition 1.737*** (7.27) 2438 0.46
Low industry competition 0.852*** (3.78) 2503 0.43
High Horwath ranking 0.812 (0.82) 124 0.79
Low Horwath ranking 1.268 (1.40) 189 0.63
157. High block ownership 0.096 (0.21) 402 0.49
Low block ownership 1.330* (1.80) 395 0.58
This table presents the results of regressing the 2-year change in
market value of assets on changes in
firm characteristics, scaled by total book value of assets. Firms
are categorized as being financially
constrained (FC) and unconstrained (NFC) according to their
book value of assets and dividend
payout ratio. DCt column reports the estimated coefficients on
DCt in Equation (2). All explanatory
variables are deflated by the total book value of assets. All
variables are winsorized at the 1st and
99th percentiles. This approach reduces the impact of extreme
observations by assigning the cut-off
value to values beyond the cut-off point. t-statistics (reported in
parentheses) significant at the 10, 5
and 1 per cent levels are designated with *, ** and ***,
respectively.
364 H. W. H. Chan et al./Accounting and Finance 53 (2013)
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158. on firms’ value of cash holdings. As to the role of corporate
governance, we find
limited evidence of its association with the value of cash
holdings. Our findings
indicate that internal financing has clear cost advantages over
external financing
for firms with high growth potential and facing uncertain
prospects. Costly exter-
nal financing would force firms to save more cash for current
operating and
future investing needs. Investors are aware of these cash
hoarding policies and
view them favourably. Our results are robust to using
alternative model specifi-
cations (the market value regressions) and alternative estimation
models, such as
the industry fixed-effects model and the firm fixed-effects
model. Overall, our
findings are mainly consistent with the cash regime of raising
cash holdings
based on the ability to access external capital, as in the study of
Hennessy and
Whited (2005).
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