Corporate governance, excess-cash and firm value: Evidence from ASEAN-5

Akhtar Tahir ()
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Akhtar Tahir: Department of Economics and Finance, College of Business Administration, University of Ha’il, Saudi Arabia

Economics and Business Review, 2022, vol. 8, issue 4, 39-67

Abstract: This study investigates the role of the country- and firm-level governance practices on the relationship between excess-cash and firm value in ASEAN-5 markets. Using the Generalized Method of Moment models and a sample of 578 firms from 2010 to 2020 the study finds that excess-cash reduces firm value, indicating high agency costs and low firm value. However, excess-cash motivated by managerial ownership, founder CEO, board independence, shareholder rights and creditor rights increase firm value while excess-cash due to managerial entrenchment and CEODuality reduce firm value. In the sub-sample analyses the study finds that entrenched managers and board size play a less effective role in wasting excess-cash in low-excess-cash firms while independent directors play a higher monitoring role in high-excess-cash firms. In addition, governance at the country-level is more effective than at the firm-level in improving the value of excess-cash in large firms. The study offers unique evidence on the relationship between excess-cash and firm value by integrating corporate governance practices at the firm- and country-levels. The research aids practitioners, academics, policymakers and investors in developing the best liquidity policies to enhance business performance.

Keywords: excess-cash; corporate governance; firm value; ASEAN (search for similar items in EconPapers)
JEL-codes: C1 C3 N6 O16 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecobur:v:8:y:2022:i:4:p:39-67:n:5

DOI: 10.18559/ebr.2022.4.3

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