Is Managerial Ownership a Determinant of Cash Holdings? : An Empirical Investigation of Corporations Listed at the Oslo Stock Exchange.

Abstract

In this master thesis, we investigate managerial ownership as a possible determinant of corporate cash holdings in a sample of Norwegian corporations listed at the Oslo Stock Exchange. We focus on the importance of managerial ownership as a disciplinary factor with respect to how companies deploy cash, in addition to interrelated factors such as corporate governance and controlling owners, leverage, and growth opportunities. We fail to find evidence in support of managerial ownership affecting cash holdings when we only control for general firm-specific characteristics. However, under some circumstances, i.e. when we interact managerial ownership with a proxy for growth opportunities (MKTBOOK), we find that managerial ownership has a significant negative effect on cash holdings. Given that our empirical findings, to a large extent, do not support a statistically significant relationship between managerial ownership and cash holdings, we cannot unambiguously motivate and recommend initiation of managerial ownership with the purpose of solving a potential agency conflict between shareholders and managers.