Do liquid assets lure managers? Evidence from corporate misconduct

Rashid Zaman, Nader Atawnah, Muhammad Nadeem, Stephen Bahadar, Irfan Haider Shakri

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)

Abstract

We examine the effect of asset redeployability on corporate misconduct and find a significant positive relationship. Utilizing a large sample of public US firms for the period of 2001 to 2015, we find that a one standard deviation (SD) increase in the proportion of redeployable assets leads to a 7.2% increase in corporate fines. We also find that the positive association between asset redeployability and corporate misconduct varies across types of misconduct and industrial heterogeneity. In our channel analysis, we find that managerial risk-taking is a potential mechanism through which asset redeployability is associated with misconduct. Additional tests reveal that corporate misconduct associated with asset redeployability leads to lower firm value. Our results remained robust in a series of sensitivity tests and continue to hold after accounting for potential endogeneity concerns. Our paper contributes to the ongoing discourse on the costs and benefits of asset redeployability.

Original languageEnglish
Pages (from-to)1425-1453
Number of pages29
JournalJournal of Business Finance and Accounting
Volume49
Issue number7-8
DOIs
Publication statusPublished - Jul 1 2022
Externally publishedYes

Keywords

  • agency conflict
  • asset redeployability
  • corporate misconduct
  • managerial risk-taking

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance

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