Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia
This study examined the association between political connections and corporate cash holdings, with a focus on financially-constrained companies. Using a unique dataset of the top 500 publicly listed companies in Malaysia as determined by market capitalization for the years 2001-2004, this study mea...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Inderscience Enterprises Ltd.
2021
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| Subjects: | |
| Online Access: | http://umpir.ump.edu.my/id/eprint/31598/ http://umpir.ump.edu.my/id/eprint/31598/1/Kweh%20et%20al.%20%282021%29_IJBEX_Cover.pdf |
| _version_ | 1848823806846566400 |
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| author | Kweh, Qian Long Irene, Wei Kiong Ting Noor Azlinna, Azizan Norazlin, Ahmad |
| author_facet | Kweh, Qian Long Irene, Wei Kiong Ting Noor Azlinna, Azizan Norazlin, Ahmad |
| author_sort | Kweh, Qian Long |
| building | UMP Institutional Repository |
| collection | Online Access |
| description | This study examined the association between political connections and corporate cash holdings, with a focus on financially-constrained companies. Using a unique dataset of the top 500 publicly listed companies in Malaysia as determined by market capitalization for the years 2001-2004, this study measured political connections based on informal ties and government supports. The empirical results of this study show that companies with financial constraints have a lower level of cash holdings, while politically connected companies hold more cash. However, politically connected companies with financial constraints hold more cash. Taken together, this study shows that financially constrained companies are relatively conservative in their cash holdings when they are politically connected even though they are generally perceived as risky by investors, consistent with precautionary motives. The outcome of this study should prove useful in assessing the potential economic consequences to the business environment of politically connected companies, especially in shaping corporate policy. |
| first_indexed | 2025-11-15T03:03:00Z |
| format | Article |
| id | ump-31598 |
| institution | Universiti Malaysia Pahang |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T03:03:00Z |
| publishDate | 2021 |
| publisher | Inderscience Enterprises Ltd. |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | ump-315982022-04-13T04:53:18Z http://umpir.ump.edu.my/id/eprint/31598/ Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia Kweh, Qian Long Irene, Wei Kiong Ting Noor Azlinna, Azizan Norazlin, Ahmad HG Finance This study examined the association between political connections and corporate cash holdings, with a focus on financially-constrained companies. Using a unique dataset of the top 500 publicly listed companies in Malaysia as determined by market capitalization for the years 2001-2004, this study measured political connections based on informal ties and government supports. The empirical results of this study show that companies with financial constraints have a lower level of cash holdings, while politically connected companies hold more cash. However, politically connected companies with financial constraints hold more cash. Taken together, this study shows that financially constrained companies are relatively conservative in their cash holdings when they are politically connected even though they are generally perceived as risky by investors, consistent with precautionary motives. The outcome of this study should prove useful in assessing the potential economic consequences to the business environment of politically connected companies, especially in shaping corporate policy. Inderscience Enterprises Ltd. 2021 Article PeerReviewed pdf en http://umpir.ump.edu.my/id/eprint/31598/1/Kweh%20et%20al.%20%282021%29_IJBEX_Cover.pdf Kweh, Qian Long and Irene, Wei Kiong Ting and Noor Azlinna, Azizan and Norazlin, Ahmad (2021) Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia. International Journal of Business Excellence (IJBEX), 24 (1). pp. 125-141. ISSN 17560-047. (Published) https://doi.org/10.1504/IJBEX.2021.115372 https://doi.org/10.1504/IJBEX.2021.115372 |
| spellingShingle | HG Finance Kweh, Qian Long Irene, Wei Kiong Ting Noor Azlinna, Azizan Norazlin, Ahmad Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia |
| title | Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia |
| title_full | Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia |
| title_fullStr | Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia |
| title_full_unstemmed | Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia |
| title_short | Political connections and cash holdings in financially constrained firms: evidence from top 500 firms in Malaysia |
| title_sort | political connections and cash holdings in financially constrained firms: evidence from top 500 firms in malaysia |
| topic | HG Finance |
| url | http://umpir.ump.edu.my/id/eprint/31598/ http://umpir.ump.edu.my/id/eprint/31598/ http://umpir.ump.edu.my/id/eprint/31598/ http://umpir.ump.edu.my/id/eprint/31598/1/Kweh%20et%20al.%20%282021%29_IJBEX_Cover.pdf |