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

Author

Listed:
  • Qi Luo

    (Department of Industrial Engineering & Management, Graduate School of Decision Science and Technology, Tokyo Institute of Technology, Japan)

  • Toyohiko Hachiya

    (Department of Industrial Engineering & Management, Graduate School of Decision Science and Technology, Tokyo Institute of Technology, Japan)

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.

Suggested Citation

  • Qi Luo & Toyohiko Hachiya, 2005. "Corporate Governance, Cash Holdings, and Firm Value: Evidence from Japan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 8(04), pages 613-636.
    • Handle: RePEc:wsi:rpbfmp:v:08:y:2005:i:04:n:s0219091505000580
    DOI: 10.1142/S0219091505000580
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    References listed on IDEAS

    as
    1. Miguel A. Ferreira & Antonio S. Vilela, 2004. "Why Do Firms Hold Cash? Evidence from EMU Countries," European Financial Management, European Financial Management Association, vol. 10(2), pages 295-319, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Corporate governance; cash holdings; firm value; Japan;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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