Strategic deviance and cash holdings

Xueyan Dong, Kam C. Chan, Yujia Cui, Jenny Xinjiao Guan

Research output: Contribution to journalArticleResearchpeer-review

18 Citations (Scopus)


We examine the impact of strategic deviance on corporate cash holdings and find that firms with strategies that deviate from their industry peers hold more cash. This pattern can be consistent with an agency motive, a precautionary motive, or both. We show that the value of cash holdings decreases with strategic deviance and that the cash effect of strategic deviance increases with agency costs but not with financial constraints, consistent with an agency motive. Finally, we find that strategically deviant firms pay lower dividends and avoid more taxes, both of which can potentially contribute to cash holdings. We conclude that strategically deviant firms hold more cash due to an agency motive.

Original languageEnglish
Pages (from-to)742-782
Number of pages41
JournalJournal of Business Finance and Accounting
Issue number3-4
Publication statusPublished - Mar 2021


  • agency motive
  • cash holdings
  • deviant strategy
  • precautionary motive

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