Corporate Cash Holdings and Political Connections

27 Pages Posted: 7 May 2010

See all articles by Matthew D. Hill

Matthew D. Hill

Arkansas State University

Kathleen P. Fuller

University of Mississippi - School of Business Administration

G. W. Kelly

University of Southern Mississippi; Mississippi State University - Department of Finance and Economics

Jim Washam

Arkansas State University

Date Written: May 6, 2010

Abstract

We examine the relation between corporate liquidity and political connections measured via lobbying expenditures. This is an interesting question as many of the motives for holding cash should be diminished by political connections. Results suggest a significant and inverse relation between cash levels and lobby expenses and that the marginal value of cash decreases with lobbying. Taken together, these results suggest firms react optimally to the reduced benefits of cash linked to political connections and that the market appears to recognize the weakened benefits of cash. Overall, our research shows another way political connections can shape corporate policy.

Suggested Citation

Hill, Matthew D. and Petrie Fuller, Kathleen and Kelly, Gary Wayne and Washam, Jim, Corporate Cash Holdings and Political Connections (May 6, 2010). Available at SSRN: https://ssrn.com/abstract=1601502 or http://dx.doi.org/10.2139/ssrn.1601502

Matthew D. Hill (Contact Author)

Arkansas State University ( email )

2713 Pawnee
P.O. Box 1750
Jonesboro, AR 72467-115
United States

Kathleen Petrie Fuller

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

Gary Wayne Kelly

University of Southern Mississippi ( email )

118 College Drive
#5076
Hattiesburg, MS 39406
United States
601 266 4959 (Phone)
601 266 6110 (Fax)

Mississippi State University - Department of Finance and Economics ( email )

Mississippi State, MS 39762
United States

Jim Washam

Arkansas State University ( email )

2713 Pawnee
P.O. Box 1750
Jonesboro, AR 72467-115
United States
870-972-3035 (Phone)
870-972.3744 (Fax)

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