Corporate Governance, Cash Holdings, and Firm Value: Evidence from Japan

Toyohiko Hachiya

84 citations0/0 files storedReview of Pacific Basin Financial Markets and Policies

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Corporate Finance and Governance Financial Analysis and Corporate Governance Working Capital and Financial Performance

Abstract

This paper presents evidence on cash holdings for Japanese firms listed on the Tokyo Stock Exchange, focusing on the impact of corporate governance factors in cash holdings and the implication of cash holdings to firm value. We find that insider ownership and bank relations of firms play a significant role in determining cash holdings. Our results indicate that foreign stockholders select profitable firms to invest, and these firms have higher levels of cash. We document evidence that cash holdings lead to agency problems and impact firm value negatively, and governance characteristics affect the negative relation between cash holdings and firm value.

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1973Risk, Return, and Equilibrium: Empirical Tests 1988Management ownership and market valuation 1999The determinants and implications of corporate cash holdings 2006International Evidence on Cash Holdings and Expected Managerial Agency Problems 2001Bank Power and Cash Holdings: Evidence from Japan 2002Cash Holdings Among Small Businesses

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