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Corporate Treasury or Corporate Casino: Marketable Securities and Corporate Governance

2023; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.4396355

1556-5068

Julian Atanassov, Bektemir Ysmailov,

Insurance and Financial Risk Management

We hypothesize that managers derive private benefits from speculative investment in marketable securities and, consequently, such investments vary with the quality of corporate governance. We exploit a quasi-exogenous firm-level anti-takeover index and show that firms invest less in marketable securities when corporate governance is stronger. The effects are concentrated among hi-tech and highly intangible firms, which are more prone to agency conflicts due to the opaque and specialized nature of their assets. Further, greater allocations to marketable securities are associated with lower firm value and worse operating performance. Granular data on firms’ financial asset holdings by asset class from 10-K reports reveal that equity securities are the primary conduit for managerial agency motives studied in this paper.