Our results differ from those Opler et al. (1999) found for US firms regarding the
impact of shareholdings of managers on firms’ cash levels. They report a positive
(significant at 10%) relation between cash holdings and managerial ownership at
low levels of ownership. There is, however, no significant influence of managerial
ownership on cash holdings at higher ownership levels, i.e. there exists neither alignment
nor entrenchment. The difference between our findings and those of Opler et al.
(1999) can possibly be interpreted as evidence of the view that managerial discretion
is relatively higher in the UK than in the US. As discussed in Section 3, UK firms’
managers can be entrenched at higher levels of managerial ownership possibly due to
the lack of efficient monitoring and external disciplining. This, in turn, can provide
some explanation for the positive impact of managerial ownership on cash holdings
at somewhat higher levels.