Multiple directorships and the value of cash holdings
Ting-Kai Chou () and
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Ting-Kai Chou: National Cheng Kung University
Hsuan-Ling Feng: Tzu Chi University of Science and Technology
Review of Quantitative Finance and Accounting, 2019, vol. 53, issue 3, No 2, 663-699
Abstract This study examines the impact of multiple directorships on the value destruction associated with increases in cash holdings. We find that the marginal value of cash increases with multiple directorships. Furthermore, the positive relationship between cash value and multiple directorships is more pronounced for firms with higher managerial agency problems. Additional analyses suggest that multi-board directors limit a firm’s holdings of excess cash, and especially directors having current industry affiliations have better ability to perform their monitoring function. Firms with multi-board directors make better cash acquisitions. Multiple directorships improve subsequent operating performance associated with capital expenditures and R&D investments. When firms have limited investment opportunities, multiple directorships result in more dividend payouts of cash. Collectively, our results suggest that multiple directorships are associated with a more efficient use of cash, thereby providing direct benefits to shareholders.
Keywords: Multiple directorships; Cash holdings; Agency costs; Market value (search for similar items in EconPapers)
JEL-codes: G12 G34 G35 (search for similar items in EconPapers)
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