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Corporate governance and cash holdings: the way forward

Tahir Akhtar (Malaysia-Japan International Institute of Technology (MJIIT), Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia)
Mohamad Ali Tareq (Malaysia-Japan International Institute of Technology (MJIIT), Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia)
Muhammad Rizky Prima Sakti (Malaysia-Japan International Institute of Technology (MJIIT), Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia)
Adnan Ahmad Khan (Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia)

Qualitative Research in Financial Markets

ISSN: 1755-4179

Article publication date: 8 May 2018

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Abstract

Purpose

This 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/approach

The authors provide a literature review of corporate governance and cash holdings through a conceptual and theoretical argument rather than empirical research.

Findings

The 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/value

The 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.

Keywords

Citation

Akhtar, T., Tareq, M.A., Sakti, M.R.P. and Khan, A.A. (2018), "Corporate governance and cash holdings: the way forward", Qualitative Research in Financial Markets, Vol. 10 No. 2, pp. 152-170. https://doi.org/10.1108/QRFM-04-2017-0034

Publisher

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Emerald Publishing Limited

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