Impact of Board Ownership Structure on Firm Value and Excessive Cash Holdings: Evidence from Pakistan

Mosab I. Tabash, Adel Ahmed, Linda Nalini Daniel and Yasmeen Elsantil
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Mosab I. Tabash: College of Business, Al Ain University, Al Ain, United Arab Emirates
Adel Ahmed: Amity Business School, Amity University Dubai, Dubai International Academic City, United Arab Emirates
Linda Nalini Daniel: Faculty of Business, Higher Colleges of Technology, United Arab Emirates
Yasmeen Elsantil: Department of Business Administration, Faculty of Commerce, Tanta University, Tanta, Egypt

Advances in Decision Sciences, 2023, vol. 27, issue 3, 109-134

Abstract: [Objective] This study investigates the influence of board ownership structure on firm value and the management of excessive cash holdings. [Methods] Data from the financial statements of 72 Pakistani firms were collected and analyzed using a Fixed Effect Model (FEM). [Findings] The statistical analysis reveals a significant correlation between the board ownership structure and firm value, emphasizing the pivotal role of efficient management in enhancing firm value and optimizing the utilization of excess cash holdings. The study also demonstrates the significance of the coefficient of determination about board size and firm value. [Implications] Based on the findings, we recommend that companies actively promote diversity among board members, encompassing not only in terms of gender, age, and nationality but also in knowledge, skills, and information. Such diversity plays a crucial role in ensuring compliance with good corporate governance mechanisms and governance codes, offering valuable insights for firm managers seeking to optimize their firm's value. Additionally, we suggest that firms consider the sensitivity of their board ownership structure when making decisions regarding excessive cash holdings and firm value. This study's focus on board ownership structure, firm value, and cash holdings in Pakistan provides valuable insights that can inform decision-making theory, corporate governance decisions, and policy discussions, making it relevant to the broader field of decision sciences. [Novelty] While the study acknowledges the well-explored relationship between corporate governance and firm performance, it focuses explicitly on the impact of board ownership structure, highlighting the significance of understanding how the composition of boards, including ownership patterns, influences firm value and financial practices.

Keywords: Board Ownership Structure; Firm Value; Excessive Cash Holdings; Corporate Governance; PSX (search for similar items in EconPapers)
JEL-codes: G30 G32 G38 (search for similar items in EconPapers)
Date: 2023
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