Controlling Owners and Corporate Cash Holdings in the Nordic Countries

We contribute to the literature on corporate cash holdings by looking at the Nordic countries, where ownership concentration is quite heterogeneous, and in some firms very high. The large owners are also frequently rather poorly diversified, which allows us to study the relationship between ownership concentration and cash holdings in a high corporate governance environment, where a possible positive link is more likely to be due to the high risk aversion
of poorly diversified owners rather than e.g. tunneling. We find that concentrated ownership is positively associated with higher cash holdings, and such a positive relationship also holds for the specific owner types of the management and the state. The existence of dual shares, which allows for control with less capital, significantly reduces the need for cash holdings. The corporate cash holdings have significantly increased in the post crises period, significantly more so in firms with highly concentrated ownership.