ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

An Empirical Research on The Family Firm’s Cash Holdings and Performance

  • Seo, Dae Seog School of Business Administration, Yeungnam University

Asian Tax Journal Vol. 15 No. 3 (2014), pp. 73-104

Abstract

This study investigates the level of cash holdings in family firms, how family firms use holdingscash on investment and how firm’s performance is improved through this compare to non－familyfirms. In details, we sample the companies listed in the Kis－Value from 2004 to 2010, excludingthe financial companies. Base on a comprehensive sample, we use regression analysis to test the level of cash holdingsin family firms relative to non－family firms. And from this we investigates whether or not familyfirms use the higher level of cash holdings on capital expenditures’investment to protect futuregenerations and firm’s honor compare to non－family firms. An then, we test whether or notfirm’s performance in the futures is increased following to this capital expenditures’investment. As expectation, we find that the level of cash holdings in family firms is lower andsimultaneously family firms use more holdings cash on capital expenditures’ investment than non－family firms. And the last empirical result also shows that relative to non－family firms, familyfirms gain more improved performance in the future due to capital expenditures. According to these empirical results, we show the evidence about differential level of cashholdings between family firms and non－family firms. And by extension, we find the use ofvariation of cash holdings’ level and simultaneously consider firm’s future performance followingthis. Thus, this is contribution in our paper.

Keywords

  • Family Firm
  • Level of cash holdings
  • Capital expenditures
  • firm’s performance

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