Motives for corporate cash holdings:the CEO optimism effect


We examine the chief executive officer (CEO) optimism effect on managerial motives for cash holdings and find that optimistic and non-optimistic managers have significantly dissimilar purposes for holding more cash. This is consistent with both theory and evidence that optimistic managers are reluctant to use external funds. Optimistic managers hoard cash for growth opportunities, use relatively more cash for capital expenditure and acquisitions, and save more cash in adverse conditions. By contrast, they hold fewer inventories and receivables and their precautionary demand for cash holdings is less than that of non-optimistic managers. In addition, we consider debt conservatism in our model and find no evidence that optimistic managers’ cash hoarding is related to their preference to use debt conservatively. We also document that optimistic managers hold more cash in bad times than non-optimistic managers do. Our work highlights the crucial role that CEO characteristics play in shaping corporate cash holding policy.

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Divisions: College of Business and Social Sciences > Aston Business School > Accounting
College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
College of Business and Social Sciences > Aston Business School
Additional Information: The final publication is available at Springer via
Uncontrolled Keywords: cash holdings,cash holdings motive,CEO optimism,liquidity,Business, Management and Accounting(all),Accounting,Finance
Publication ISSN: 1573-7179
Last Modified: 17 May 2024 07:12
Date Deposited: 02 Jun 2015 14:40
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Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
PURE Output Type: Article
Published Date: 2016-10
Published Online Date: 2015-05-17
Accepted Date: 2015-05-16
Authors: Huang-Meier, Winifred (ORCID Profile 0000-0002-8989-8595)
Lambertides, Neophytos
Steeley, James M. (ORCID Profile 0000-0003-0345-5089)



Version: Accepted Version

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