Browsing by Author "Carneiro, Jorge"
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- Determinants of corporate cash holdings in private and public companies: insights from Latin AmericaPublication . Moraes, Marcelo Botelho da Costa; Manoel, Aviner Augusto Silva; Carneiro, JorgeDespite growing academic and media interest in cash management, little is known about the cash-holding behavior of private firms, particularly in emerging economies, and the influence of the cost of carrying cash on their cash levels. This study addresses this gap by analyzing the determinants of cash holdings in private and public companies within the Latin American setting. Additionally, it investigates whether Latin American private firms maintain lower or higher cash holdings than their public counterparts. The findings challenge Keynes’ (The general theory of employment, interest and money, McMillan, London, 1936) precautionary motive for holding cash, demonstrating that private firms hold significantly lower cash levels than public firms under conditions of costly external financing. This disparity is attributed to the elevated costs of carrying cash stemming from restricted access to external funding, higher transaction costs, and pronounced information asymmetry, which amplify cash management challenges for private firms. The findings persist across various robustness checks, including propensity score matching and Heckman’s (Econometrica 47:153–161, 1979) two-step treatment effect model. Our research contributes to the literature on cash holdings by highlighting the crucial role of the cost of carrying cash in shaping cash levels in private versus public companies. By presenting a theoretical framework that explains the divergent cash-holding behaviors between private and public companies, our study provides a detailed understanding of the determinants of cash management decisions. The insights presented enrich the discussion of cash management and underscore the unique challenges private firms face in emerging markets.
- The effects of multinationality on the market value of cash: evidence from Latin AmericaPublication . Manoel, Aviner Augusto Silva; Moraes, Marcelo Botelho da Costa; Carneiro, Jorge; Toledo, Eloisa Perez-deThe aim of this paper is to examine whether the value investors place on cash holdings varies between multinationals and domestic firms from Latin America. Utilizing data from the six largest Latin American economies, our analyses with different proxies of multinationality reveal that investors do not attribute a significant valuation premium, nor do they impose a price discount, on the cash held by Latin American multinational corporations (Multilatinas) when compared to the cash of their domestic counterparts. These findings suggest that shareholders do not view Multilatinas' cash holdings as conferring greater advantages relative to those of domestic firms. We interpret this as evidence that the perceived benefits of multinationality, such as increased growth potential, may be counterbalanced by elevated agency costs and greater information asymmetry. Our study advances the literature on cash holdings and international business and discusses implications for stakeholders of multinational corporations that have subsidiaries in countries with potential growth opportunities but in which poor investor protection may lead to agency conflicts and the risk of improper cash diversion. Our research yields important implications for policymakers by highlighting the relevance of requiring the disclosure of disaggregated information about domestic and foreign cash to improve efficiency in stakeholder decision-making.