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How Does Firm-Specific Investor Sentiment Affect the Value of Corporate Cash Holdings?

Guo, H. and Yin, C. and Zeng, Y. (2022) 'How Does Firm-Specific Investor Sentiment Affect the Value of Corporate Cash Holdings?', British Journal of Management .

Abstract

We document a positive relation between firm-specific investor sentiment (FSIS) and the value of cash. We also show that FSIS has a stronger positive effect on the value of cash than the value of other types of assets, suggesting that our finding is not a simple reflection of firm-level overvaluation. Our finding is robust to alternative measures of change in cash, different cash regimes, FSIS measured by order imbalance, news sentiment, and the tone of earnings conference call transcripts, and controlling for market-wide sentiment, institutional monitoring, corporate governance, and endogeneity. Cross-sectional analyses suggest that the positive relation between FSIS and the value of cash is stronger for firms with better future growth opportunities, larger investment, more innovation activities, higher information asymmetry, and more liquid stocks. Overall, our paper sheds light on the important role of FSIS in corporate outcomes.

Item Type:Article
Full text:Publisher-imposed embargo
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Available under License - Creative Commons Attribution Non-commercial No Derivatives 4.0.
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Status:Peer-reviewed
Publisher Web site:https://doi.org/10.1111/1467-8551.12602
Publisher statement:© 2022 The Authors. British Journal of Management published by John Wiley & Sons Ltd on behalf of British Academy of Management This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.
Date accepted:31 January 2022
Date deposited:07 February 2022
Date of first online publication:24 February 2022
Date first made open access:15 June 2022

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