Does corruption amplify or mitigate the impact of ownership structure on cash?

Event details

With a within-country quasi natural experiment and a global cross-country set up we show that the interaction of corruption with ownership structure has a first order effect on firms’ cash holdings. The negative impact of corruption on cash is twice as strong for diffuse ownership firms compared to concentrated ownership firms. Our finding suggests that an increase in corruption aligns insiders with minority shareholders and reduces the firms’ cash to mitigate the risk of expropriation by the state. We further find that an increase in corruption has negative externalities. Diffuse ownership firms increase their dividend payouts and investment in illiquid assets as a sheltering mechanism, and pay fewer taxes compared to concentrated firms. A more diffuse ownership structure amplifies the negative economic effects of corruption.

About the Speaker

Dimitris is a Professor in Finance at the University of Strathclyde and serves as Associate Editor for “The European Journal of Finance”. He is a member of the Research Panel of the Institute of Chartered Accountants of Scotland (ICAS), he is an Academic Fellow at the Centre for Responsible Banking & Finance (CRBF) of the University of St. Andrews, and he serves as research assessor for the Carnegie Trust and the ESRC.

His research interests are Corporate Finance, Corporate Governance, Political Economy, and Sustainable Finance. Finally, his research is published in the Journal of Corporate Finance, Journal of Banking and Finance, Journal of Empirical Finance, and the European Financial Management among others.

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