| Summary: | 碩士 === 台南應用科技大學 === 商學與管理研究所 === 100 === From either the perspective of agency problem or the pecking order theory, the difference between cash holding levels is related to the future value of a firm. The governance practices of a firm also can affect its use of cash. This paper we examine the relationships between corporate governance, cash holding policies and the overall effects of excess cash holdings on the future value of publicly-listed firms in Taiwan.
We find that the structure of corporate ownership would affect the corporate cash holdings, but no evidence shows that the board structure is related to the change in cash holdings. The relationship between ownership and cash holdings is non-linear using the piecewise linear specifications, and find that with an increase in board ownership, there is a reduction in cash holdings followed by a rise. The greater shareholder rights are associated with lower cash holdings, which prove the shareholder has the ability to control the cash holding levels. When there is a greater deviation between control rights and cash flow rights (the value is smaller), controlling shareholders may elect to increase their personal benefits as opposed to increasing firm value, and as such, they will tend to have greater cash holdings. Besides, firms with higher institutional ownership have more cash holdings and can relieve the over-investment problems.
Finally, we also provide evidence that firms with excess cash holding will decline their growth prospects. However, there is no relationship between excess cash holding and the stock returns.
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