In this study, the relationship between corporate cash holdings and corporate governance variables is tested in Pakistan. The sample consists of 309 non-financial firms listed on the Karachi Stock Exchange (KSE) over the time span of 2002 to 2010. The study uses several proxies for corporate governance mechanisms such as percentage ownership held by directors, institutional investors, and five largest shareholders, the existence of audit committees and a measure of concentration of ownership. To avoid omitted variable bias, the study also controls for all well-known determinants of corporate cash holdings (market to-book ratio, growth, size, leverage, R&D investments, cash flow volatility and cash flows). The two main findings of the study are (i) director’s ownership and board size are negatively related with corporate cash holdings. The institutional shareholdings, concentration of shares and the ownership percentage of 5 big shareholders are directly related to cash holdings. (ii) Among the control variables, growth and size are insignificant while dividend and cash flows are positively associated with cash holdings and leverage, capital expenditure and net-working capital are negatively related to cash holdings. The findings imply that managers of the firms do not misuse the cash when more monitoring and control is involved by the shareholders. The results also indicate that cash holdings by the firms are maintained for the dividend payments. Finally, debt and working capital act as a cash substitute for firms which lead to less cash holdings.

Corporate Governance and Cash Holdings in Listed Non-Financial Firms of Pakistan

In this study, a comparative analysis of manufacturing and services industry is conducted to test the relationship between corporate governance and cash holdings of non-financial listed firms in Pakistan. Several proxies for corporate governance were used, such as the institutional ownership, directors’ ownership, ownership concentration, board size and board independence. To avoid omittedvariable bias in explaining cash holdings of these firms, seven control variables were also included namely growth, dividend, size, leverage, capital expenditures, net-working capital and cash flows. The study reveal that for manufacturing firms the growth is found to be positively related with cash holdings, while size of firm, leverage and networking capital are negatively related with the cash holdings. On the other side, for servicing firms, board independence and dividend are directly related to cash holdings while leverage and net-working capital are negatively related to cash holdings by these firms. However, most of the proxies are found to be insignificant, which is an indication of weak corporate governance in Pakistan in determining the cash holding decision.

The impact of corporate governance on cash holdings: a comparative study of the manufacturing and service industry

This study aims to investigate the direct and mediated associations among ownership structure (OS), cash holdings (CHs) and firm value (FV). It provides empirical evidence from insurance firms list...

Direct and Mediated Associations Among Ownership Structure, Cash Holdings and Firm Value: The Case of Jordanian Insurance Firms:

Principles of Corporate Finance. Milo Kimball

The main purpose of this paper is to study whether corporate governance aspects like board size, audit committee and board composition affect the return on equity (performance) of companies listed on Pakistan Stock Exchange. The data were gathered by purposive sampling techniques from the Balance Sheet Analysis report available on the State Bank of Pakistan website and relevant companies’ websites. A regression model was incorporated to measure the available data for a sample of 50 firms, with a total of 150 years of observations for a period of 2013 -2015. The empirical results indicate that board size, audit committee and board composition are positively associated to return on equity. The result of this study suggests that each organization needs to develop good corporate practices to significantly improve the shareholder wealth in the form of return on equity.  The selected sample is taken from non-financial firms with a small sample size, therefore, in future for more generalizability of the results a study may be undertaken to consider financial and non- financial firms with a large sample size.

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Corporate Governance and Return on Equity Evidence from Pakistan Stock Exchange

This paper investigates the interactive relationship between cash holdings and corporate performance. Based on the empirical research results, this paper also aims to analyze the ideal cash holdings. The paper establishes the regression equation of corporate performance influencing cash holdings and the regression equation of cash holdings influencing corporate performance with both single-equation model and simultaneous-equations model. The research dataset consists of the financial information of the Chinese A-share manufacturing listing companies from 2007 to 2009 considering the influence of financial characteristics and corporate governance on cash holdings and corporate performance. During the research, we eliminate variables with stepwise regression analysis. We find that there is a positive interactive relationship between cash holdings and corporate performance. The improvement of corporate performance increases cash holdings. Finally, we put forward the calculation of ideal cash holdings. The paper proves that cash holdings and corporate performance interact in a very complex way by using three-stage least squares innovatively. Furthermore, the calculation of ideal cash holdings is of great significance to improve corporate performance in China.

Empirical research on the interactive relationship between cash holdings and corporate performance of listed companies in China

Price-to-Book Value (P/B) is an important financial indicator which measures the development potential of a listed company. Studying P/B's influencing factors in the listed real estate companies has both theoretical and practical significance to the sustainable development of national economy. This paper discussed the listed real estate companies in China's stock market from 2008 to 2012, and analyzed P/B's influencing factors through multiple linear regression method. The research found that return on equity, operating profit growth rate and asset-liability ratio have a significant positive effect on the increase of P/B. The largest shareholder's shareholding ratio, size of the company and net assets per share are negatively correlated to the increase of P/B. Finally, this paper presented some suggestions to maintain a reasonable P/B in the listed real estate companies on the basis of the research results.

Tao Ping

Papers

Empirical research on the interactive relationship between cash holdings and corporate performance of listed companies in China

Empirical research of price-to-book value's influencing factors in the listed real estate companies