Predation risk, market power and cash policy
ISSN: 0307-4358
Article publication date: 22 May 2020
Issue publication date: 21 September 2020
Abstract
Purpose
The purpose of the present study is to discuss the combined effect of predation risk and firms' market power on cash holdings.
Design/methodology/approach
The authors tested hypotheses by using consolidated financial data in Japanese firms.
Findings
The authors find that firms' cash holdings increase with a rise in predation risk faced by firms. However, the higher the firm's market power, the weaker the above interplay becomes. Moreover, the authors find that even when firms' investments are decreased at the industry level, firms with larger cash holdings seek to mitigate predation risk by funding strategic investments with the potential to steal rivals' market share.
Originality/value
The authors recognize the importance of a firm's market power. Take a firm's market power into consideration to analyze the mechanism of a firm's cash holdings, there is a possibility that the mechanism of a firm's cash holdings as presented by the previous studies will be changed.
Keywords
Citation
Mitani, H. (2020), "Predation risk, market power and cash policy", Managerial Finance, Vol. 46 No. 7, pp. 897-911. https://doi.org/10.1108/MF-05-2019-0222
Publisher
:Emerald Publishing Limited
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