Cash holding and over-investment behavior in firms with problem directors

Md Borhan Uddin Bhuiyan and Jill Hooks

International Review of Economics & Finance, 2019, vol. 61, issue C, 35-51

Abstract: This paper examines the empirical relationship between cash holding and investment behavior when problem directors are on the Board. We argue that problem directors provide lower quality (weak) corporate governance which encourages excess cash holdings. The findings show consistent evidence that firms with at least one problem director hold more cash. In addition, evidence is found that firms with higher cash holdings engage in over-investment and such behavior is more pronounced when problem directors are on the board. This study contributes to the limited research on the professional history of directors and provides evidence of the financial effects for firms served by problem directors.

Keywords: Problem directors; Cash holdings; Over-investment (search for similar items in EconPapers)
JEL-codes: G39 M16 M41 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:61:y:2019:i:c:p:35-51

DOI: 10.1016/j.iref.2019.01.005

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