CEO Turnover and Corporate Cash Holdings: A Perspective on Precautionary and Agency Motives

This study examines the relationship between CEO turnover and corporate cash holdings through the lens of managerial cash retention motives, using data from firms listed on the Korea Exchange from 2014 to 2023. The findings indicate that CEO turnover is associated with a significant increase in cash holdings, particularly in firms facing heightened uncertainty and financial constraints, aligning with precautionary motives. This effect is also more pronounced in firms with weaker market monitoring, which is consistent with agency motives. Additional analyses show that both the precautionary and agency motives become more influential in non-chaebol firms, and in cases of forced turnover and external CEO appointments. Conversely, neither motive is significant in chaebol-affiliated firms, voluntary turnovers, or internal promotions. These findings suggest that the increase in cash holdings following CEO turnover is driven by the simultaneous operation of both motives under specific conditions.