The impact of corporate governance on the cash-investment sensitivity- The case of grouping and free-standing firms

• Main Authors: Jian-Wen Chen, 陳建文
• Other Authors: Pei-Gi Shu
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/06768461925887555252

碩士 === 輔仁大學 === 管理學研究所 === 97 === Using a sample of Taiwanese electronic firms we find that better-governed firms are associated with a lower cash flow sensitivity of investment. Moreover, we find that the quality of corporate governance is negatively associated with information asymmetry and therefore firm’s cost of equity. However, the reduction in cash flow sensitivity of investment is much significant for free-standing firms than for grouping firms. Grouping firms have access to internal capital markets and hence depend less on external financial sources. As predicted, the benefit of quality corporate governance on the reduction of external cost of equity and cash flow sensitivity of investment is smaller in grouping firms than in free-standing firms. Our findings shed light on the importance of corporate governance on the reduction of external cost of capital and therefore a reduction of investment-cash flow linkage.