The Effect of Human Capital Quality on the Level of Cash Holdings: The Mediating Role of Agency Costs

Aflatooni, Abbas; Khotanlou, Mohsen; HosseinAbadi, Yaser

[Home ] [Archive]

[ فارسی ]

Main Menu

Home

Journal Information

Articles archive

For Authors

For Reviewers

Registration

Contact us

Site Facilities

Search in website

Receive site information

year 16, Issue 63 (2025)

fa 2025, 16(63): 72-87

Back to browse issues page

The Effect of Human Capital Quality on the Level of Cash Holdings: The Mediating Role of Agency Costs

Abbas Aflatooni ^*¹

, Mohsen Khotanlou¹

, Yaser HosseinAbadi¹

1- Department of Accounting, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamedan, Iran.

Abstract: (16 Views)

Various factors influence the level of cash holdings in companies. This research examines the impact of human capital quality on cash holdings and analyzes the mediating role of agency costs in this relationship. For this purpose, data from 2070 firm-year observations of companies listed on the Tehran Stock Exchange during the period 2009-2023, organized as an unbalanced panel, were used. The research's regression models, controlling for years and industries fixed effects, as well as without these controls, were estimated using the generalized least squares (GLS) estimator. Clustered standard errors at the firm level were applied to control for heteroscedasticity and correlation. The results indicate that human capital quality has a significant positive (negative) effect on the level of cash holdings (agency costs) in companies, and as agency costs increase, the level of cash holdings decreases. Additionally, the findings show that agency costs mediate the relationship between human capital quality and cash holdings, with human capital quality transferring between 5% to 8% of its effect on cash holdings through agency costs and the remaining effect directly. The results indicate that the research findings are robust to the use of alternative measures for cash holdings and agency costs.

Article number: 5

Keywords: Human Capital Quality, Level of Cash Holdings, Agency Costs, Mediator effect

Full-Text [PDF 670 kb] (13 Downloads)

Type of Study: Research | Subject: Special

References

1. Acharya, V. V., H. Almeida & M. Campello. (2013). Aggregate risk and the choice between cash and lines of credit. The Journal of Finance 68(5): 2059-2116.‏

2. Alchian, A.A., & H. Demsetz. (1972). Production, information costs, and economic organization. The American Economic Review 62(5): 777-795.‏

3. Almeida, H., M. Campello & M.S. Weisbach. (2004). The cash flow sensitivity of cash. The Journal of Finance 59(4): 1777-1804.‏

4. Ang, J.S., R.A. Cole & J.W. Lin. (2000). Agency costs and ownership structure. The Journal of Finance 55(1): 81-106.‏

5. Bae, J., & J. Kang. (2023). The role of labor in cash holdings: Evidence from the supply-side impact of COVID-19. Economics Letters 224: 111034.‏

6. Baker, M., & J. Wurgler. (2002). Market timing and capital structure. The Journal of Finance 57(1): 1-32.

7. Belo, F., V.D. Gala, J. Salomao & M.A. Vitorino. (2022). Decomposing firm value. Journal of Financial Economics 143(2): 619-639.‏

8. Canil, J., & S. Karpavičius. (2022). Managerial risk-taking incentives and cash holding in US firms: Evidence from FAS 123R. International Review of Economics and Finance 78: 605-628.‏

9. Cheng, L., R. Li, Z. Ma & L. Ruan. (2024). Skilled labor and bank loan contracting. Journal of Business Finance and Accounting 51(1-2): 297-333.‏

10. Chung, H.J., H. Jhang & D. Ryu. (2023). Impacts of COVID-19 pandemic on corporate cash holdings: Evidence from Korea. Emerging Markets Review 56: 101055.‏

11. Colvin, A.J., & W.R. Boswell. (2007). The problem of action and interest alignment: Beyond job requirements and incentive compensation. Human Resource Management Review 17(1): 38-51.‏

12. Damle, H., & R.K. Sinha. (2024). Human capital quality and cash holdings. Journal of Contemporary Accounting and Economics 20(3): 100437.‏

13. Datta, S., & M. Iskandar‐Datta. (2014). Upper‐echelon executive human capital and compensation: Generalist vs specialist skills. Strategic Management Journal 35(12): 1853-1866.‏

14. Dittmar, A.K., & R. Duchin. (2010). The dynamics of cash. Working Paper. Ross School of Business. Available at: https://dx.doi.org/10.2139/ssrn.1569529

15. Duchin, R., O. Ozbas & B.A. Sensoy. (2010). Costly external finance, corporate investment, and the subprime mortgage credit crisis. Journal of Financial Economics 97(3): 418-435.‏

16. Dudley, E., & Zhang, N. (2016). Trust and corporate cash holdings. Journal of Corporate Finance 41: 363-387.‏

17. Falato, A., D. Kadyrzhanova, J. Sim & R. Steri. (2022). Rising intangible capital, shrinking debt capacity, and the US corporate savings glut. The Journal of Finance 77(5): 2799-2852.‏

18. Gao, H., J. Harford & K. Li. (2013). Determinants of corporate cash policy: Insights from private firms. Journal of Financial Economics 109(3): 623-639.

19. Gao, R., Y. Grinstein & W. Wang. (2014). Firms’ cash holdings, precautionary motives, and systematic uncertainty. Available at: https://dx.doi.org/10.2139/ssrn.2478349

20. systematic uncertainty. Available at: https://dx.doi.org/10.2139/ssrn.2478349 Harbula, P. (2001). The free cash-flow theory versus financial constraints, investments, corporate governance and soft budgeting problems. Acta Oeconomica 51(4): 489-512.‏

21. He, Z., S. Suardi, K. Wang & Y. Zhao. (2022). Firms’ COVID-19 pandemic exposure and corporate cash policy: Evidence from China. Economic Modelling 116: 105999.‏

22. Honda, T., & I. Uesugi. (2022). COVID-19 and precautionary corporate cash holdings: Evidence from Japan. Japanese Journal of Monetary and Financial Economics 10: 19-43.‏ Available at: https://ideas.repec.org/p/hit/rcesrs/dp21-2.html

23. Jensen, M.C., & W.H. Meckling. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3(4): 305-360.

24. Jiang, G., C.M. Lee & H. Yue. (2010). Tunneling through intercorporate loans: The China experience. Journal of Financial Economics 98(1): 1-20.‏

25. Keynes, J.M. (1936). The General Theory of Employment, Interest, and Money. Available at: https://www.files.ethz.ch/isn/125515/1366_keynestheoryofemployment.pdf

26. Khoo, J., & A. Cheung. (2023). Does skilled labor risk matter to suppliers? Evidence from trade credit. Financial Review 58(2): 423-447.‏

27. Lozano, M.B., & S. Yaman. (2020). The European financial crisis and firms' cash holding policy: An analysis of the precautionary motive. Global Policy 11: 84-94.‏

28. Luo, J.H., X. Li & H. Chen. (2018). Annual report readability and corporate agency costs. China Journal of Accounting Research 11(3): 187-212.‏

29. Miller, E.M. (1977). Risk, uncertainty, and divergence of opinion. The Journal of Finance 32(4): 1151-1168.

30. Myers, S.C., & N.S. Majluf. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics 13(2): 187-221.

31. Opler, T., L. Pinkowitz, R. Stulz & R. Williamson. (1999). The determinants and implications of corporate cash holdings. Journal of Financial Economics 52(1): 3-46.

32. Orlova, S.V., & R.P. Rao. (2018). Cash holdings speed of adjustment. International Review of Economics and Finance 54: 1-14.

33. Pagano, M., & P.F. Volpin. (2005). Managers, workers, and corporate control. The Journal of Finance 60(2): 841-868.‏

34. Peters, R.H., & L.A. Taylor. (2017). Intangible capital and the investment-q relation. Journal of Financial Economics 123(2): 251-272.‏

35. Qiu, Y., & T.Y. Wang. (2021). Skilled labor risk and corporate policies. The Review of Corporate Finance Studies 10(3): 437-472.‏

36. Riddick, L.A., & T.M. Whited. (2009). The corporate propensity to save. The Journal of Finance 64(4): 1729-1766

37. Rogers, W.H. (1993). sg17: Regression standard errors in clustered samples. Stata Technical Bulletin 13, 19-23. College Station, TX: Stata Press.

38. Song, K.R., & Y. Lee. (2012). Long-term effects of a financial crisis: Evidence from cash holdings of East Asian firms. Journal of Financial and Quantitative Analysis 47(3): 617-641.‏

39. Sun, Z., & Y. Wang. (2015). Corporate precautionary savings: Evidence from the recent financial crisis. The Quarterly Review of Economics and Finance 56: 175-186

Send email to the article author

Add your comments about this article

Mendeley

Zotero

RefWorks

Aflatooni A, Khotanlou M, HosseinAbadi Y. The Effect of Human Capital Quality on the Level of Cash Holdings: The Mediating Role of Agency Costs. fa 2025; 16 (63) : 5
URL: http://qfaj.mobarakeh.iau.ir/article-1-2821-en.html

Rights and permissions
	This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

year 16, Issue 63 (2025)

Back to browse issues page

Persian site map - English site map - Created in 0.06 seconds with 35 queries by YEKTAWEB 4714