Corporate governance, cash holding, and firm performance in an emerging market

Yushi Jiang, Muhammad Shujaat Mubarik, Syed Imran Zaman*, Syed Hasnain Alam, Muhammad Arif

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

Extant literature highlights the significance of the corporate governance (CG) mechanism in mitigating agency conflict. Literature also confirms the instrumentality of the board structure (measured as size, diversity, independence and CEO duality) in overcoming the agency problem. In this context, the present study examines the impact of board structure on a firm's cash holding (CH) levels. Likewise, the study tests the role of cash-holding (CH) in the association between board structure and a firm's performance. Secondary data from 262 PSX-listed manufacturing and servicing sector firms have been taken for analysis. Panel regression and Generalized Methods of Movement (GMM) were employed to test the modelled relationships. Results show that most of the CG variables, that is, CEO duality, board size, executive compensation, and diversity, do not affect a firm's CH levels in the service and manufacturing sectors. However, the results display a negative and significant impact of block holders (BH), measured as the ratio of the top five shareholders, on cash holding in manufacturing. Likewise, the sector-wise analysis shows that cash holding significantly mediates between board size and ROA. In contrast, its role between other dimensions of CG and RoA was insignificant. The findings also revealed that firms with frailer CG structures tend to have less CH and can be prone to external environmental risk.

Original languageEnglish
Pages (from-to)2787-2803
Number of pages17
JournalInternational Journal of Finance and Economics
Volume29
Issue number3
Early online date15 Mar 2023
DOIs
Publication statusPublished - Jul 2024

Keywords

  • cash holding
  • corporate governance
  • firm performance
  • manufacturing firms
  • servicing firms

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Corporate governance, cash holding, and firm performance in an emerging market'. Together they form a unique fingerprint.

Cite this