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Corporate governance, excess-cash and firm value: Evidence from ASEAN-5

Author

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  • Akhtar Tahir

    (Department of Economics and Finance, College of Business Administration, University of Ha’il, Saudi Arabia)

Abstract

This study investigates the role of the country- and firm-level governance practices on the relationship between excess-cash and firm value in ASEAN-5 markets. Using the Generalized Method of Moment models and a sample of 578 firms from 2010 to 2020 the study finds that excess-cash reduces firm value, indicating high agency costs and low firm value. However, excess-cash motivated by managerial ownership, founder CEO, board independence, shareholder rights and creditor rights increase firm value while excess-cash due to managerial entrenchment and CEODuality reduce firm value. In the sub-sample analyses the study finds that entrenched managers and board size play a less effective role in wasting excess-cash in low-excess-cash firms while independent directors play a higher monitoring role in high-excess-cash firms. In addition, governance at the country-level is more effective than at the firm-level in improving the value of excess-cash in large firms. The study offers unique evidence on the relationship between excess-cash and firm value by integrating corporate governance practices at the firm- and country-levels. The research aids practitioners, academics, policymakers and investors in developing the best liquidity policies to enhance business performance.

Suggested Citation

  • Akhtar Tahir, 2022. "Corporate governance, excess-cash and firm value: Evidence from ASEAN-5," Economics and Business Review, Sciendo, vol. 8(4), pages 39-67, December.
    • Handle: RePEc:vrs:ecobur:v:8:y:2022:i:4:p:39-67:n:5
    DOI: 10.18559/ebr.2022.4.3
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    References listed on IDEAS

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    More about this item

    Keywords

    excess-cash; corporate governance; firm value; ASEAN;
    All these keywords.

    JEL classification:

    • N6 - Economic History - - Manufacturing and Construction
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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