The Impact of Managerial Entrenchment Indicators on Cash Holding Adjustments: Stock Exchange Firms

Abstract

This paper investigates the relationship between the managerial entrenchment and cash holding adjustments for a sample of 140 firms listed in the Tehran Stock Exchange (TSE) during 2011 to 2016. To measure the managerial entrenchment, four indicators of manager's duality, management reward, dividends, and over-investment risk were employed. A multiple linear regression model was used in order to test the hypotheses of the research. The results indicate that when management rewards were used to measure the managerial entrenchment, there is a significant positive relationship between the management rewards and cash holding adjustments. Also, there is a significant positive relationship between the over- investment risk and cash holding adjustments. Cash holding speed was found to have a significant positive effect on the relationship between dividend (managerial entrenchment) and cash holding adjustments. These results suggest a significant positive relationship between the managerial entrenchment and cash holding adjustments.