Corporate Governance Mechanisms and Corporate Cash Holdings

46 Pages Posted: 3 Mar 2005

See all articles by Yuanto Kusnadi

Yuanto Kusnadi

Singapore Management University - School of Accountancy

Date Written: November 2004

Abstract

In this paper, we examine whether corporate governance mechanisms play some role in determining the cash balances held by Singapore corporations. We document that board size, insider dominance of the board, and non-management blockholder ownership are important determinants of cash holdings. We further find that the incremental value of holding excess cash is negative even after controlling for board size or insider dominance. These findings are consistent with the agency view of cash holdings. Managers in firms with poor corporate governance have more discretion over corporate cash policies, and the value reduction imposed on these firms may reflect minority shareholders' recognition of the possibility of managerial entrenchment.

Keywords: Corporate Governance Mechanisms; Corporate Cash Holdings

JEL Classification: G30, G32, G34

Suggested Citation

Kusnadi, Yuanto, Corporate Governance Mechanisms and Corporate Cash Holdings (November 2004). Available at SSRN: https://ssrn.com/abstract=675462 or http://dx.doi.org/10.2139/ssrn.675462

Yuanto Kusnadi (Contact Author)

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore
+65 6808 5449 (Phone)

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