Cash Holdings, Corporate Governance Structure and Firm Valuation

2009 ◽  
Vol 12 (03) ◽  
pp. 475-508 ◽  
Author(s):  
Kin-Wai Lee ◽  
Cheng-Few Lee
Keyword(s):  
Firm Value ◽  
Cash Holdings ◽  
Positive Association ◽  
Governance Structure ◽  
Lower Proportion ◽  
Board Independence ◽  
Outside Directors ◽  
Corporate Governance Structure ◽  
Managerial Entrenchment ◽  
Outside Director

Firms with higher board independence, smaller boards, and lower expected managerial entrenchment, have lower cash holdings. We find that the positive association between cash holdings and managerial entrenchment is mitigated by stronger board structures. Specifically, in firms with higher expected managerial entrenchment, those with higher proportion of outside director on the board and smaller board size have lower cash holdings. We also find that firm value is negatively associated with cash levels. The negative association between firm value and cash holdings is more pronounced in firms with (i) lower proportion of outside directors, (ii) larger boards and (iii) higher expected managerial entrenchment. For firms with both high cash holdings and high expected managerial entrenchment, investors additionally discount the valuation of firms with lower proportion of outside directors and those with larger boards.

Independent directors and firm value of group-affiliated firms

2017 ◽  
Vol 25 (2) ◽  
pp. 217-236 ◽  
Author(s):  
Amrinder Khosa
Keyword(s):  
Ownership Structure ◽  
Firm Value ◽  
Value Relevance ◽  
Institutional Setting ◽  
Independent Directors ◽  
Board Independence ◽  
Outside Directors ◽  
Content Type ◽  
Listed Firms ◽  
Indian Setting

Purpose This study aims to examine the effect of board independence on firm valuation of group-affiliated firms in distinct Indian setting. Design/methodology/approach This study uses a sample of 317 listed firms comprising 1,350 firm-year observations for the period 2008-2012. The value-relevance model is used to examine the effect of board independence on market value of equity. Findings The distinct finding of an inverse relationship between board independence and firm value of group-affiliated firms in India illustrates that effective monitoring by outside directors is largely influenced by the institutional setting and ownership structure. This study does not find any evidence of different valuation when comparing non-family CEOs and family CEOs. Practical implications Independent directors play an important role to stop abusive use of related-party transactions in an environment where principal–principal conflict exists. The study’s findings will prove useful in determining whether one should rely merely on the independent status of outside directors or the influence of institutional setting on effective governance. Originality/value This paper contributes to the existing literature in the following ways: it helps to gain a better understanding of business groups which are characterised by unique governance structures and the dominance of controlling families on the board, which makes the external governance mechanisms (i.e. independent directors and non-family CEOs) ineffective and it illustrates that effective monitoring by outside directors is largely influenced by the institutional setting and ownership structure.

Corporate governance and turnaround: Evidence from Australia

2020 ◽  
Vol 45 (4) ◽  
pp. 549-578
Author(s):  
Seema Miglani ◽  
Kamran Ahmed ◽  
Darren Henry
Keyword(s):  
Institutional Ownership ◽  
Jel Classification ◽  
Board Independence ◽  
Outside Directors ◽  
Firm Level ◽  
Corporate Turnaround ◽  
Outside Director ◽  
Director Ownership ◽  
The Relationship ◽  
Matched Samples

We examine the relationship between ownership and outside director attributes and corporate turnaround outcomes using matched samples of 99 turnaround and 99 non-turnaround listed Australian firms during the 2004–2015 period. Based on agency theory principles, we propose that key shareholder groups (block ownership, director ownership, institutional ownership) and outside directors are related to firm-level turnaround outcomes, and particularly changes in these attributes across decline to turnaround periods. Our results provide evidence that turnaround and non-turnaround firms differ in terms of their ownership and board composition structures, and that changes in director ownership and the degree of board independence are important in determining the likelihood of turnaround success. JEL Classification: G33, G34, M40

scholarly journals Effect of profitability and dividend policy on corporate governance and firm value: Evidence from the Indonesian manufacturing Sectors

2018 ◽  
Author(s):  
Muhammad Tamrin ◽  
H. Rahman Mus ◽  
Sudirman ◽  
Aryati Arfah
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Sampling Technique ◽  
Governance Structure ◽  
Manufacturing Companies ◽  
Corporate Governance Structure ◽  
Insignificant Effect ◽  
Analysis Technique

This study aims to analyze the effect of Profitability and Corporate Governance Structure on dividend policy and its impact on the firm value. The population in this research is manufacturing companies listed in Indonesia Stock Exchange as many as 146 companies. The research sample as many as 58 companies, the period of 2013 to 2015. Sampling technique used is purposive sampling. The data analysis technique used is WrapPLS. The results showed that profitability have a negative and significant effect on dividend policy. Profitability has a negative and significant effect on firm value. Profitability is a negative and insignificant effect on firm value as a mediated dividend policy. The structure of corporate governance is positive and significant effect on dividend policy. Corporate governance structure has a positive and significant effect on firm value. Corporate governance structure has a positive and insignificant effect on firm value as a mediated dividend policy. Dividend policy is a positive and insignificant effect on firm value

scholarly journals The Effect Of Corporate Governance On Unfaithful Disclosure Designation And Unfaithful Disclosure Penalty Points

2017 ◽  
Vol 33 (5) ◽  
pp. 887-902
Author(s):  
Bo Young Moon ◽  
Soo Yeon Park
Keyword(s):  
Corporate Governance ◽  
Positive Association ◽  
Listed Companies ◽  
Outside Directors ◽  
Disclosure Quality ◽  
Significant Positive Association ◽  
Short Period ◽  
Outside Director ◽  
Prior Literature ◽  
Short Term Investment

This paper investigates the relation between Unfaithful Disclosure Corporations (“UDC”) and corporate governance using listed firm (KOSPI and KOSDAQ) data in Korea. Prior literature reports that corporate governance has an impact on the level of disclosure and the quality of disclosure provided by companies. However, it is hard to find the studies about corporate governance and UDC at the term of disclosure quality. Compare to some financially advanced countries, Korea established corporate governance in a relatively short period of time; hence concerns have been raised the corporate governance have not played effective role to monitor management. We question how corporate governance affects companies’ unfaithful disclosure by using several corporate governance proxy variables and UDC data which is unique system in Korea. From the empirical tests, we find a negative association between the proportion of outside directors, an indicator of the board’s independence, and UDC designation, among companies listed on both KOSPI and KOSDAQ. On the other hand, there is a significant positive association between the proportion of outside directors and UDCs’ imposed and accumulated penalty points among KOSDAQ-listed companies. This implies that outside director system effectively play a monitoring role however due to different natures of members included in outside directors, the system often fails to control regarding based reasons for penalty points imposition. In addition, we find the percentage of foreign equity ownership showed statistically significant positive association with UDC designation and a significant positive association with the imposed and accumulated penalty points among KOSPI-listed companies. We interpret this results that foreign investors with a short-term investment propensity may not enough to play a proper monitoring role in Korea and thereby they cannot effectively control the disclosure quality provided by the management. We also find that there is a significant positive association between the percentage of managerial ownership and UDC designation in the KOSDAQ market.   This study will contribute to academics and disclosure-related practitioners by documenting about corporate governance and its impact on unfaithful disclosure corporations.

scholarly journals Corporate Governance, Shareholder Rights, and Shareholder Rights Plans: Poison, Placebo, or Prescription?

2008 ◽  
Vol 43 (2) ◽  
pp. 381-400 ◽  
Author(s):  
Gary L. Caton ◽  
Jeremy Goh
Keyword(s):  
Corporate Governance ◽  
Stock Returns ◽  
Firm Value ◽  
Abnormal Returns ◽  
Governance Structure ◽  
Shareholder Rights ◽  
Corporate Governance Structure ◽  
Earnings Growth ◽  
Forecast Revisions ◽  
Abnormal Stock Returns

AbstractWe examine the effect of poison pill adoptions on firm value, controlling for the adopting firm's preexisting corporate governance structure. We find that only companies with the most democratic governance structures, defined as those with the fewest preexisting protective governance provisions, experience significantly positive abnormal stock returns and significantly positive abnormal revisions in five-year earnings growth rate forecasts. Moreover, regression results indicate that abnormal returns and forecast revisions are significantly related to governance structure and not to board composition or subsequent merger activity.

scholarly journals The effect of cash holdings and corporate governance on firm value: Evidence from the Amman Stock Exchange

2021 ◽  
Vol 10 (4, special issue) ◽  
pp. 272-281
Author(s):  
Hamza Zaki Jaradat ◽  
Ahmad Awad Alnaimi ◽  
Safaa Adnan Alsmadi
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Stock Exchange ◽  
Gender Diversity ◽  
Cash Holdings ◽  
Positive Association ◽  
Negative Effects ◽  
Amman Stock Exchange ◽  
Code Of Corporate Governance ◽  
The Impact

Much effort has been expended by the regulators in Jordan to enhance the code of corporate governance (CG); however, the effectiveness of CG mechanisms in monitoring management and enhancing the value of a firm is still a puzzle. This study aims to investigate the impact of CG and cash holdings (CH) on firm value as measured by the market-to-book ratio. The sample consists of all manufacturing firms listed on the Amman Stock Exchange (ASE) over the years 2010–2017. The study hypotheses were tested using panel regression analysis. The research findings suggest that CH have a positive association with firm value, supporting the transaction and precautionary motives for holding cash. An interesting finding is that board expertise was found to be negatively associated with firm value. Gender diversity was found to be positively related to firm value, while board size, independence, and frequency of meetings were found to be insignificant. It seems that firms in Jordan regard strong CG mechanisms to be expensive and of little value in mitigating the negative effects of a weak legal system. These findings shed new light on the influence (or the lack of it) of boards in Jordanian firms. Consequently, the study recommends that the regulatory agencies in Jordan should consider improving governance codes and Rules to increase the effectiveness of the board and governance in general.

scholarly journals Effect of profitability and dividend policy on corporate governance and firm value: Evidence from the Indonesian manufacturing Sectors

2018 ◽  
Author(s):  
Muhammad Tamrin ◽  
H. Rahman Mus ◽  
Sudirman ◽  
Aryati Arfah
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Sampling Technique ◽  
Governance Structure ◽  
Manufacturing Companies ◽  
Corporate Governance Structure ◽  
Insignificant Effect ◽  
Analysis Technique

This study aims to analyze the effect of Profitability and Corporate Governance Structure on dividend policy and its impact on the firm value. The population in this research is manufacturing companies listed in Indonesia Stock Exchange as many as 146 companies. The research sample as many as 58 companies, the period of 2013 to 2015. Sampling technique used is purposive sampling. The data analysis technique used is WrapPLS. The results showed that profitability have a negative and significant effect on dividend policy. Profitability has a negative and significant effect on firm value. Profitability is a negative and insignificant effect on firm value as a mediated dividend policy. The structure of corporate governance is positive and significant effect on dividend policy. Corporate governance structure has a positive and significant effect on firm value. Corporate governance structure has a positive and insignificant effect on firm value as a mediated dividend policy. Dividend policy is a positive and insignificant effect on firm value

scholarly journals A non-linear relationship between cash holdings and firm value: Study of companies in the emerging economy

2021 ◽  
Vol 10 (4) ◽  
pp. 137-143
Author(s):  
Amneh Hamad ◽  
Tariq Alzoubi ◽  
Majd Iskandrani ◽  
Ali Alhadidi
Keyword(s):  
Firm Value ◽  
Stock Exchange ◽  
Emerging Market ◽  
Cash Holdings ◽  
Positive Association ◽  
Optimal Level ◽  
Substantial Contribution ◽  
Non Linear ◽  
Negative Effect ◽  
A Company

This research aims to gauge the effect of cash holdings on Jordanian companies’ value and to detect whether there is a non-linear association between them. By conducting a multivariate regression on 86 non-financial companies listed on Amman Stock Exchange (ASE) during the period from 2006 to 2017. The results of the research reveal that there is a significantly positive association between cash holdings and firm value. The study also shows the positive impacts of financial leverage and revenues growth on firm value, while the results show that a size of a company has a negative effect on a value of a company. Moreover, the study notices that there is no optimal level to reserve some cash in order to increase firm value in Jordan. The methodology of the study depends on the work of Martínez-Sola, García-Teruel, and Martínez-Solano (2013) and Nguyen, Nguyen, and Le (2016). This research documents a substantial contribution to the existing research works that investigate the association between cash holdings and firm value in an emerging market like Jordan. Moreover, the findings are recognized to be an interest to policymakers, scholars, and potential investors.

Sign in / Sign up

Export Citation Format

Share Document