The Value of Cash Holdings, Corporate Governance and Ownership Disparity: Evidence from Korean Conglomerates

2015 ◽  
Author(s):  
Seung Hun Han ◽  
Dongwook David SEO ◽  
Hohyun Kim
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Value Of Cash

Over-investment, the marginal value of cash holdings and corporate governance

2015 ◽  
Vol 32 (2) ◽  
pp. 204-221 ◽  
Author(s):  
Chih Jen Huang ◽  
Tsai-Ling Liao ◽  
Yu-Shan Chang
Keyword(s):  
Corporate Governance ◽  
Agency Costs ◽  
Negative Impact ◽  
Cash Holdings ◽  
Firm Level ◽  
Content Type ◽  
Publicly Traded Companies ◽  
Marginal Value ◽  
Value Of Cash ◽  
Cash Reserves

Purpose – The purpose of this paper is to examine how investors’ valuation of cash holdings is related to firm-level investment. Design/methodology/approach – As prior studies note that holding excess cash serve as a driver to would be over-investing, and that over-investment imposes substantial agency costs on shareholders, the authors focus on the value implications of holding cash in the presence of over-investment from the perspective of shareholders. Findings – By examining the publicly traded companies on Taiwan stock market, the authors uncover that cash is valued less in firms with over-investment than in those with under-investment and the magnitude of over-investment is negatively related to the marginal value of cash holdings (MVCH). It reveals that investment activities impact the value that shareholders place on cash holdings. Moreover, further tests indicate that higher block holdings and the presence of independent directors on boards can effectively mitigate the negative impact of over-investment on the MVCH. Practical implications – This paper enhances the understanding of the valuation implications of cash reserves held by firms with over-investment and the effectiveness of governance structures in containing the detrimental effect of investment-related agency costs on the value of holding cash. Originality/value – This paper provides pioneering evidence that outside investors discount cash assets in over-investing firms to reflect their expectations that they will not receive the full benefit of these assets; and this paper extends the literature on corporate governance by assessing the role of governance mechanisms in reversing the negative relation between over-investment and the MVCH.

Corporate governance and the value of cash holdings

2007 ◽  
Vol 83 (3) ◽  
pp. 599-634 ◽  
Author(s):  
Amy Dittmar ◽  
Jan Mahrt-Smith
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Value Of Cash

scholarly journals Related-Party Transactions, Chaebol Affiliations, and the Value of Cash Holdings

2021 ◽  
Vol 13 (2) ◽  
pp. 699
Author(s):  
Hyunjung Choi ◽  
Jungeun Cho
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Agency Problems ◽  
Governance Structure ◽  
Management Decisions ◽  
Corporate Governance Structure ◽  
Related Party Transactions ◽  
Public Firms ◽  
Extant Literature ◽  
Value Of Cash

This study examines whether related-party transactions (RPTs) impact the value of firms’ cash holdings. Using a 2011–2018 sample of Korean public firms, we find that greater RPTs lead to lower cash holdings value. In particular, this decline is more pronounced in Korean chaebol firms than in non-chaebol firms. Our findings suggest that a unique and complex corporate governance structure of chaebol firms makes it difficult for outside investors to monitor firms’ internal cash management decisions, resulting in a negative valuation of cash holdings. This study contributes to the extant literature by providing additional evidence that RPTs in chaebol firms with severe agency problems may lower the value of cash holdings.

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