Anti-takeover provisions, managerial overconfidence, and corporate cash holdings in Korean listed firms

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The management of an entity faces diverse decisions concerned with corporate operations and financing choices. Investigating various factors affecting a company’s cash holdings provides valuable insights into the decision-making processes of an organization. This study examines the effect of Anti-Takeover Provisions (ATPs), Managerial Overconfidence, and their interaction on the level of an entity’s cash holdings. Conducting a regression analysis, this study examines 3,409 firm-year observations from Korean listed entities covering 2011 to 2018. Results reveal that anti-takeover provisions positively influence an entity’s cash holdings (coefficient = 0.464, t-stat value = 7.83). Additionally, managerial overconfidence negatively affects cash holdings (coefficient = –0.140, t-stat value = –2.77). Furthermore, the interaction between anti-takeover provisions and managerial overconfidence significantly influences cash holdings (coefficient = –0.402, t-stat value = –3.46), especially in firms employing specific provisions such as supermajority vote requirements for executive dismissal (coefficient = –0.445, t-stat value = –2.73), issuance of convertible preferred stock (coefficient = –0.341, t-stat value = –1.76), and golden parachutes (coefficient = –0.715, t-stat value = –3.02). This study provides empirical evidence on how anti-takeover provisions and managerial traits influence corporate cash reserves. The study offers valuable insights for regulators, investors, and corporate management. It also emphasizes prudent cash management, urging firms, especially those with anti-takeover provisions and overconfident management, to reconsider financial policies to mitigate risks associated with aggressive decision-making.

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    • Table 1. Descriptive statistics (N = 3,409)
    • Table 2. Pearson correlation (N = 3,409)
    • Table 3. Main analysis: ATP and overconfidence panel regression results on cash holdings
    • Table 4. Additional analyses: ATP and overconfidence panel regression results on cash holdings using various types of ATPs
    • Conceptualization
      Kevin Troy Chua, A-Young Lee, Hansol Lee
    • Data curation
      Kevin Troy Chua, A-Young Lee
    • Formal Analysis
      Kevin Troy Chua, A-Young Lee, Hansol Lee
    • Investigation
      Kevin Troy Chua
    • Methodology
      Kevin Troy Chua, A-Young Lee
    • Project administration
      Kevin Troy Chua, A-Young Lee, Hansol Lee
    • Resources
      Kevin Troy Chua
    • Validation
      Kevin Troy Chua, A-Young Lee, Hansol Lee
    • Visualization
      Kevin Troy Chua
    • Writing – original draft
      Kevin Troy Chua, A-Young Lee
    • Writing – review & editing
      Kevin Troy Chua, A-Young Lee, Hansol Lee
    • Funding acquisition
      A-Young Lee
    • Software
      A-Young Lee
    • Supervision
      A-Young Lee, Hansol Lee