Corporate Governance and Cash Holdings－The Empirical Evidence of Taiwanese Listed Companies

• Main Authors: Kuo-Hua Yun, 雲國華
• Other Authors: Hai-Chin Yu
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/82307223778016694134

碩士 === 中原大學 === 國際貿易研究所 === 95 === This paper investigates the relationship between corporate governance and cash holdings in Taiwanese Listed Companies. The empirical results show that evidence of a significant non-monotonic relation between managerial ownership and cash holdings in all samples. We find that cash holdings first fall as managerial ownership up to 4.93% (i.e. the incentive alignment effect), it would reduce firms’ incentive to accumulate cash. Then rise at higher levels of managerial ownership (i.e. the entrenchment effect), manager would choose to hold more cash to pursue their own interests and higher the managerial moral hazard problems. In high-tech industry, cash holdings first a negative (incentive alignment effect) as managerial ownership up to 6.04%, then a positive (entrenchment effect) exerted by managerial ownership on cash holdings. In high-tech industry, the empirical result was a negative impact between controlling shareholders of the voting rights and cash holdings; but in traditional industry, it was a positive impact. This result reveal that controlling shareholders of high-tech companies is to effectively monitor managers to ensure that they act in the interests of shareholders and to alleviate the agency problem. In institutional investors and cash holdings, no matter what high-tech or traditional industry, it is always a positive impact. At the same time, whether or not CEO and COB are the same person, the variable estimated coefficient is positive and significant. In internal control mechanisms, it was the lack of efficient monitoring and make firms hold higher cash balances. In summary, insufficient external market discipline and the lack of efficient monitoring in Taiwan Stock Exchange, and should reinforce corporate governance to reduce the managerial moral hazard problems.