در این مقاله اهمیت کیفیت درآمد به عنوان یکی از عوامل تعیین کننده دارایی های نقدی توسط شرکت ها مورد بررسی قرار گرفته است. در میان عوامل دیگر، ماهیت درآمد ها (مثبت یا منفی) و سطح افشای مالی، که توسط بازارهایی که در آن شرکت ها فهرست شده اند (بازار اصلی یا بازارهای سرمایه گذاری جایگزین AIM در انگلستان) را بررسی می کند. براساس نمونه ‌ای که دوره سال های ۱۹۹۸-۲۰۱۵ را پوشش می ‌دهد، ما شواهدی را ارایه می ‌دهیم که با کاهش کیفیت درآمد، شرکت‌ ها تمایل به نگهداری دارایی نقدی بیشتری دارند، به جز هنگامی که شرکت ها در هر دو بازار اصلی و AIM متحمل زیان می شوند.

علاوه بر این، ما مدرکی ارائه می دهیم که اطلاعاتی که به وسیله کیفیت درآمد منتقل می شود، تعیین کننده تر از میزان ذخائر نقدی برای بازار اصلی است تا شرکت های AIM (که سطح افشای مالی و نظارت پایین تر است). به طور کلی، شواهد ما نشان می دهد که تراز نقدی تحت تأثیر مثبتِ وجود عدم تقارن اطلاعاتی بیشتر ، ناشی از کیفیت ضعیف درآمدها است، همچنین از وجود سطوح پایین تر نظارت بر مقررات و وقوع زیان‌ ها است، که هر دو اهمیت کیفیت درآمد را به عنوان یک عامل تعیین کننده در سطوح نقدینگی کاهش می ‌دهند. نتایج ما همچنین نشان می دهد که به نظرشرکت هایی با سطوح بالاتری از ناپایداری درآمدها، از داشتن دارایی های نقدی بیشتر بهره مند می شوند تا از وابستگی به منابع مالی گران قیمت جلوگیری کنند.

کلید واژگان : بازارهای جایگزین، دارایی های نقدی، کیفیت درآمد، افشای مالی، عدم تقارن اطلاعاتی

Abstract

In this paper we investigate the importance of earnings quality as a determinant of cash holdings by companies, exploring among other factors the nature of earnings (positive or negative) and the level of financial disclosure, proxied by the market where firms are listed (Main or AIM-Alternative Investment Markets in the United Kingdom). Based on a sample covering the period of 1998–۲۰۱۵, we provide evidence that as earnings quality decreases, firms tend to hold more cash except when firms are facing losses in both Main and AIM markets. In addition, we document that information conveyed by earnings quality is a more important determinant of cash reserve levels for Main Market than for AIM firms (where the level of financial disclosure and oversight is lower).

Overall, our evidence suggests that cash balances are positively influenced by the presence of greater information asymmetries arising from poor earnings quality but also from the existence of lower levels of regulatory oversight and the occurrence of losses, both of which reduce the importance of earnings quality as a determinant of cash levels. Our results also imply that companies with higher levels of earnings opaqueness seem to benefit from having higher cash holdings so as to avoid dependence from costly external funding.

Keywords Alternative markets,Cash holdings,Earnings quality,Financial disclosure,Information asymmetry

Introduction and motivation

Prior research has shown that companies may set their levels of cash holdings by trading off the costs and benefits of larger liquidity reserves (Miller & Orr, 1966). Costs that have been analysed typically include low returns and possible tax disadvantages of cash reserves (Bigelli & Sánchez-Vidal, 2012) while usual benefits that have been identified are the reduction in transaction costs that would exist in the case of new capital raising or the liquidation of assets, the reduced likelihood of default, the avoidance of possibly expensive funding or even the shortage of financing alternatives (Kim, Mauer, & Sherman, 1998; Opler, Pinkowitz, Stulz, & Williamson, 1999).

Reasons for a costly external financing relate in general to the presence of information asymmetries between firms and investors (Myers & Majluf, 1984) or to the existence of agency problems associated with underinvestment and asset substitution (Jensen & Meckling, 1976). Additionally, managers may pursue their own interests by maintaining large amounts of cash on companies’ balance sheets so as to keep sub-optimal levels of net debt, risk and/or dividends in comparison to those desired by shareholders (Easterbrook, 1984). With the exception of García-Teruel, Martínez-Solano, and Sánchez- Ballesta (2009) who focused on Spanish firms prior to the adoption of

IFRS by listed business groups, there has been, however, little research on the relation between cash reserves and earnings quality in an European setting. In the US context, Sun, Yung, and Rahman (2012) show a negative impact of earnings quality on corporate cash holdings. Chung, Kim, Kim, and Zhang (2015) document that companies in industries with greater levels of information asymmetry hold lower amounts of cash balances, consistent with a shareholders monitoring hypothesis where managers are restrained from holding large cash reserves that could be misused when their environment is more opaque. The UK is a particularly interesting setting to test the relationship between earnings quality and cash-holdings.

This is not just due to earnings quality being usually perceived to be higher in Anglo-Saxon (common-law) accounting systems than in continental Europe (code-law) ones but also because, as Ball, Kothari, and Robin (2000) observe, “within the common-law group, there is less asymmetric conservatism in accounting income in the United Kingdom, a country we characterize in terms of lower political involvement in accounting, lower litigation costs and less issuance of public debt” (p. 4). Finally, we are able also to test whether differentlevels of financial disclosure for UK companies according to the particular requirements of their listing market (the AIM-Alternative Investment Market or the Main Market) have an impact on the corporate need for cash balances. As Nielsson (2013) and Jenkinson and Ramadorai (2013), among others, observe, companies in the AIM market face fewer reporting obligations in comparison with their Main Market counterparts.

We posit that as firms’ earnings quality decrease, managers may need to counter a possible negative perception from investors by holding larger amounts of cash reserves. This may be caused by the fact that in the presence of lower quality earnings, information asymmetries are perceived to be stronger (as suggested by Sun et al., 2012) and external financing can become more costly or even unavailable. This in turn will lead managers to rely more on internal funds and create a cash buffer to prevent any eventual shortage of funding needed for future investments.

Given the less stringent supervision, as well as the less demanding listing and financial disclosure requirements prevailing for firms listed in the AIM market, access to external funding may be more difficult to obtain for these companies and so we explore the relation between cash holdings and earnings quality separately for firms listed in the AIM and Main Markets. Finally, we also look at companies experiencing losses, as well as those engaging in substantial R&D activities or undergoing periods of robust growth to analyse whether in these cases a negative relation between earnings quality and cash earnings can also occur along the same or different terms as for other companies.