Managerial Ownership Effects on Cash Holdings: The Case of Private Family Firms

Abstract

This paper focuses on the effect of managerial ownership on cash holdings in a sample of private family firms. Our results suggest that managerial ownership has a significant impact on cash holdings. Cash holdings are largest in the firms with no managerial ownership and lowest in the firms in which ownership and management fully coincide. However, low leverage seems to increase the need for cash holdings even in the firms in which ownership and management fully coincide. We also find weaker evidence on a nonlinear effect on cash holdings at intermediate levels of managerial stock holdings.