Quality of Governance and the Market Value of Cash: Evidence from Spain

Eloisa Perez- de Toledo and Evandro Bocatto

The International Journal of Business and Finance Research, 2013, vol. 7, issue 2, 91-104

Abstract: We examine the value shareholders attribute to one euro of extra cash held by Spanish firms and how corporate governance impacts this value by comparing the value of cash for companies with good and poor governance. The results show that one euro of extra cash is valued at a considerable premium at companies with good governance. Moreover, the presence of future growth opportunities intensifies this effect. Our results also suggest that the conflict between shareholders and debt holders is more severe in Spain than in the U.S. as investors apply a stronger discount for leverage when valuing Spanish firms.

Keywords: Corporate Governance; Cash Holdings; Firm Value; Future Growth Opportunities; Leverage (search for similar items in EconPapers)
JEL-codes: G11 G34 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:7:y:2013:i:2:p:91-104

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