Review of Corporate Finance > Vol 5 > Issue 1–2

Competition Laws and Corporate Cash Policy: International Evidence

Cephas Simon Peter Dak-Adzaklo, Lee Shau Kee School of Business and Administration, Hong Kong Metropolitan University, Hong Kong SAR, dadzaklo@hkmu.edu.hk
 
Suggested Citation
Cephas Simon Peter Dak-Adzaklo (2025), "Competition Laws and Corporate Cash Policy: International Evidence", Review of Corporate Finance: Vol. 5: No. 1–2, pp 153-198. http://dx.doi.org/10.1561/114.00000056

Publication Date: 31 Mar 2025
© 2025 C. S. P. Dak-Adzaklo
 
Subjects
Corporate finance,  International business: International finance and investment
 
Keywords
JEL Codes: G15, G32, G34, G38, M41
Competition lawsmarket competitioncash holdingsfirm value
 

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In this article:
Introduction 
Sample, Variables, and Descriptive Statistics 
Empirical Results 
Conclusion 
References 

Abstract

This article examines the association between the stringency of competition laws and corporate cash holdings using a database of competition laws across 49 countries. I find that the stringency of competition laws leads to a significant increase in corporate cash holdings. The effect is amplified for financially constrained firms, firms with lower information quality, firms in concentrated industries, and firms in countries with weaker institutional environments. In an additional analysis, I find that firms are more likely to spend cash to increase investment rather than pay excess cash to investors under intense competition. Finally, I show that intensifying competition increase the value of cash to shareholders and decrease the value of dividends to shareholders. Collectively, this paper provides evidence on competition laws as a global driver of corporate cash holdings and, more generally, highlights the strategic role of cash in competition.

DOI:10.1561/114.00000056

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Review of Corporate Finance, Volume 5, Issue 1–2 Special Issue on International Corporate Finance: Articles Overview
See the other articles that are part of this special issue.