Corporate cash hoarding and corporate governance mechanisms: evidence from Borsa Istanbul

Ahmed Hassanein and Altan Kokel

Asia-Pacific Journal of Accounting & Economics, 2022, vol. 29, issue 3, 831-848

Abstract: Hoarding cash can create conflicts of interest between managers and shareholders that lead to an agency conflict. Corporate governance is a mechanism to overcome agency conflicts. Thus, this study aims to examine the effect of corporate governance mechanisms on the corporate decision to hoard cash. The study focuses on the BIST100 nonfinancial firms listed on the Borsa Istanbul during the period from 2010 to 2014. It finds that firms with smaller boards of directors and larger audit committees are likely to hoard less cash. However, firms with a large percentage of independent directors are likely to hoard more cash. This study also finds that when the CEO of a firm acts as the chairman of the board, the firm tends to hoard more cash. Further, the study finds that firms audited by a big auditor are more likely to hoard less cash than firms audited by a non-big auditor. These results suggest that firms with good corporate governance mechanisms (except for the percentage of independent directors) are likely to hoard less cash to reduce agency conflicts.

Date: 2022
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DOI: 10.1080/16081625.2019.1617753

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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