10 Michael C. Jensen. “Agency Costs of Free Cash Flow,
Corporate Finance ond Takeovers,” American Economic
Review76 (1986): 323–329.
11 Therehavebeenseveralpapersthatshowthatcompanies
with large cash holdings are more likely to make poor
investmentsandoverpayforacquisitionswiththecash.SeeJ.
Harford, “Corporate Cash Reserves and Acquisitions,”
JournalofFinance 54 (1999):1969–1997;O.Blanchard,F.
Lopez-de-Silanes,andA.Shleifer,“WhatDoFirmsDowith
CashWindfalls?,”JournalofFinancialEconomics 36 (1994):
337–360; J. Harford, S. A. Mansi, and W.F. Maxwell,
“Corporate Governance and a Firm’s Cash Holdings,”
working paper, SSRN, (2004). The last paper finds that
companieswithweakstockholderrightsdonot havehigher
cashbalancesbutthattheytendtodissipatecashmuchmore
quickly on poor investments than firms with stronger
stockholder rights.
12 A.Dittmar,J.Mahrt-Smith,andH.Servaes,“International
Corporate Governance and Corporate Cash Holdings,”
Journal of Financial and Quantitative Analysis 38 (2003):
111–133.L.F.Pinkowitz,R.M.Stulz,andR.Williamson,
“Do Firms In Countries with Poor Protection of Investor
Rights Hold More Cash?,”working paper,SSRN, (2003).
Both papers find that companies in countries where
stockholdershavelesspowertendtoholdmorecash.Their
resultsareconfirmedbyY.Guney,A.Ozkan,andN.Ozkan,
“Additional International Evidence on Corporate Cash
Holdings,”workingpaper,SSRN,2003.Theycomparecash
holdingsacross 3989 companiesinJapan,France,Germany,
andtheUnitedKingdomandconcludethatthestrongerthe