Chief Executive Officers’ monitoring, board effectiveness, managerial ownership, and cash holdings: evidence from ASEAN

Tahir Akhtar (), Mohammad Ali Tareq () and Kashif Rashid ()
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Tahir Akhtar: University of Ha’il
Mohammad Ali Tareq: Universiti Teknologi Malaysia-Kaula Lumpur Campus
Kashif Rashid: COMSATS University Islamabad, Abbottabad Campus

Review of Managerial Science, 2021, vol. 15, issue 8, No 2, 2193-2238

Abstract: Abstract This study examines the role of corporate governance mechanisms in the handling of cash reserves among firms in the ASEAN region. A panel regression was employed along with the Generalized Method of Moments approach on a sample of 648 listed firms from the ASEAN markets for 2005–2015. We documented that strong governance mechanisms, including a lower managerial ownership, a higher proportion of board independence and founder-Chief Executive Officer (CEO), positively impact cash holdings (CH), indicating lower agency cost and supporting the interest alignment hypothesis. In contrast, higher level of managerial and board ownership, bigger board and dual leadership structure negatively affect CH, supporting the entrenchment hypothesis. The negative effect of managerial entrenchment on CH is mitigated with a higher proportion of independent board and founder-CEO. Robustness tests show that CEO-duality becomes more important while founder-CEO becomes less important in countries with weak investors’ protection. These findings support the idea that a strong governance mechanism plays an important disciplinary role to mitigate the effect of agency conflicts on the cash management policy.

Keywords: Corporate governance (CG); Cash holdings (CH); Agency theory; ASEAN; Manufacturing sector (search for similar items in EconPapers)
JEL-codes: C3 D21 G01 G30 G34 N65 O16 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11846-020-00421-0

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