Institutional investor heterogeneity and cash holding: The moderating effect of family control
The purpose of this study is to examine the effect of the presence of institutional investors (II) on the level of cash holding in a context of family ownership. Empirical results reveal that IIs with a long-term investment horizon and majority ownership are better able to control and limit cash holding accumulation. However, a passive investment behavior from these II leads managers to favor their private interests and thus extract rents from high cash hoarding. The results also show that family control can moderate institutional activism and amplifies the passivity of these investors. Indeed, family firms may favor a coalition of control with passive IIs to facilitate the expropriation of minority shareholders’ interests and weaken the power of active IIs.