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The Marginal Value of Cash in Korean Retail Firms

Title
The Marginal Value of Cash in Korean Retail Firms
Author
이정환
Keywords
Marginal Value of Cash; Financial Constraint; Manager-Shareholder Conflicts; Cash Management
Issue Date
2016-02
Publisher
한국유통과학회
Citation
유통과학연구, v. 14, NO 2, Page. 13-22
Abstract
Purpose - We examine the marginal value of cash in Korean retail firms, largely unexamined in literature. The marginal value of cash plays pivotal role in cash management policy; especially, a significantly low marginal cash value indicates substantial manager-shareholder conflicts.||||Research design, data, and methodology - We estimate marginal cash values by adopting the approach of Faulkender & Wang (2006). The sample of retail firms traded in Korean Stock Exchange from 1991 to 2013 is analyzed.||||Results - We estimate the marginal value of cash for the retail firms as 0.75, implying significant manager-shareholder conflicts. We find a lower marginal value of cash for financially constrained retail firms, contradicting existing theories. The marginal value of cash increases substantially after 2000s, suggesting severe agency conflicts in 1990s as a key reason behind our findings.||||Conclusions - Our findings support the substantial resource diversion problem in Korean firms and the agency theory of cash management policy. Our results argue against the widely accepted view focusing on implications of financial constraints, which highlights a need of new cash management theory.
URI
http://www.kci.go.kr/kciportal/landing/article.kci?arti_id=ART002083401http://hdl.handle.net/20.500.11754/31807
ISSN
1738-3110; 2093-7717
DOI
10.15722/jds.14.2.201602.13
Appears in Collections:
COLLEGE OF ECONOMICS AND FINANCE[S](경제금융대학) > ECONOMICS & FINANCE(경제금융학부) > Articles
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