Foreign institutional ownership and corporate cash holdings: evidence from emerging economies

Tiago Loncan

Research output: Contribution to journalArticlepeer-review

21 Citations (Scopus)
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With the increased presence of foreign institutional investors in emerging stock markets, academic interest on the effects of foreign institutions on corporate managerial decisions has notably increased. This paper joins this debate by investigating the effects of foreign institutional ownership on cash holdings, a strategic corporate financing choice. Analysing a sample of firms from 23 emerging economies, the paper shows that, while foreign institutional ownership has a negative effect on cash holdings, it also increases the contribution of cash to firm valuation. These effects are potentially transmitted to cash through mitigation of agency conflicts and alleviation of financing constraints. In all, our findings suggest beneficial effects of foreign institutions on firms' financing structure, as foreign investors contribute to a more efficient and value-enhancing cash policy.
Original languageEnglish
Article number101295
Number of pages13
JournalInternational Review of Financial Analysis
Issue numberOctober
Early online date22 Dec 2018
Publication statusPublished - 30 Oct 2020


  • foreign institutional ownership
  • cash holdings
  • agency costs
  • financial liberalisation
  • emerging economies


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