Corporate Risk-Taking and Cash Holdings Adjustment Speed: The Moderating Role of CEO Tenure
الموضوعات : Financial Accounting
Mahdi Kazemiolum
1
,
Mohsen Khotanlou
2
,
Noor Zaki Nabbat
3
1 - Department of Accounting, Faculty of Economic and Social Science, Bu-Ali Sina University, Hamedan, Iran.
2 - Department of Accounting, Faculty of Economic and Social Science, Bu-Ali Sina University, Hamedan, Iran.
3 - Department of Accounting, Faculty of Economic and Social Science, Bu-Ali Sina University, Hamedan, Iran.
الکلمات المفتاحية: Corporate Risk-Taking , Adjustment Speed , CEO Tenure , Generalized Method of Moments ,
ملخص المقالة :
The motivations driving cash holdings have a profound influence on corporate decision-making and performance. Exploring the dynamics between risk-taking behaviour, cash reserves, and their adjustment pace provides valuable insights into effective financial resource management. This study examines the impact of corporate risk-taking on the adjustment speed of cash holdings, with a focus on the moderating effect of CEO tenure. A sample of 151 firms listed on the Tehran Stock Exchange from 2011 to 2023 (1,963 firm-year observations) was analysed using multiple regression and the Generalized Method of Moments (GMM) estimator. Results indicate that the adjustment speed of cash holdings is 49.5%. A significant negative relationship exists between corporate risk-taking and the speed of cash holdings adjustment, suggesting that elevated risk-taking decelerates the alignment of cash reserves with optimal levels. Moreover, the findings highlight the moderating role of CEO tenure in the relationship between corporate risk-taking and the speed of cash holdings adjustment; in other words, in firms with longer-tenured CEOs, the negative association between corporate risk-taking and cash holdings adjustment speed is weaker than in firms with shorter-tenured CEOs. These findings suggest that risk-taking hinders swift cash adjustment, necessitating a precise determination of optimal cash levels to prevent liquidity shortages in high-risk scenarios. Additionally, the experience of long-tenured CEOs appears to facilitate better liquidity management, aligning corporate interests with strategic financial goals.
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