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Corporate governance and cash holdings: the way forward

Corporate governance and cash holdings: the way forward PurposeThis study aims to provide a review of corporate governance and cash holdings because strong corporate governance is necessary for the efficient utilization of firm’s liquid resources such as cash, to minimize the agency cost of high cash holdings and to improve the value of cash.Design/methodology/approachThe authors provide a literature review of corporate governance and cash holdings through a conceptual and theoretical argument rather than empirical research.FindingsThe authors review an empirical and theoretical work surrounding key corporate governance variables and identify avenues for future research. The authors find that corporate governance mechanisms and cash holdings have received much attention during the past two decades. However, the significant role of corporate governance (both country-level and the firm-level) in controlling the entrenched behaviour of the managers is discussed separately in the literature. The combined effect of both country-level and the firm-level governance is lacking in the cash holdings literature. Additionally, this study has found that much attention is paid to the developed markets, while only a few focused on the developing markets regarding cash holding literature, although the agency problems are high in developing markets.Originality/valueThe study contributes to the growing literature on corporate governance and cash holdings and provides a further understanding of the role of governance in minimizing the agency cost to increase value by assuring that firms’ assets are used efficiently and productively in the best interests of investors and other stakeholders. In addition, it provides a new idea to the policymaker and future researchers where they need to do more work. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Qualitative Research in Financial Markets Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1755-4179
DOI
10.1108/QRFM-04-2017-0034
Publisher site
See Article on Publisher Site

Abstract

PurposeThis study aims to provide a review of corporate governance and cash holdings because strong corporate governance is necessary for the efficient utilization of firm’s liquid resources such as cash, to minimize the agency cost of high cash holdings and to improve the value of cash.Design/methodology/approachThe authors provide a literature review of corporate governance and cash holdings through a conceptual and theoretical argument rather than empirical research.FindingsThe authors review an empirical and theoretical work surrounding key corporate governance variables and identify avenues for future research. The authors find that corporate governance mechanisms and cash holdings have received much attention during the past two decades. However, the significant role of corporate governance (both country-level and the firm-level) in controlling the entrenched behaviour of the managers is discussed separately in the literature. The combined effect of both country-level and the firm-level governance is lacking in the cash holdings literature. Additionally, this study has found that much attention is paid to the developed markets, while only a few focused on the developing markets regarding cash holding literature, although the agency problems are high in developing markets.Originality/valueThe study contributes to the growing literature on corporate governance and cash holdings and provides a further understanding of the role of governance in minimizing the agency cost to increase value by assuring that firms’ assets are used efficiently and productively in the best interests of investors and other stakeholders. In addition, it provides a new idea to the policymaker and future researchers where they need to do more work.

Journal

Qualitative Research in Financial MarketsEmerald Publishing

Published: May 8, 2018

References