Board Financial Expertise and Corporate Cash Holdings: Moderating Role of Multiple Large Shareholders in Emerging Family Firms

This study contributes to the literature by exploring the relationship between board financial expertise and cash holding policy and further showing how this relation is moderated by multiple large shareholders (MLS). This research is based on agency theory, resource dependence, trade-off, and pecki...

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Bibliographic Details
Published in:Complexity (New York, N.Y.) N.Y.), 2021, Vol.2021 (1)
Main Authors: MengYun, Wu, Um-e-Habiba, Husnain, Muhammad, Sarwar, Bushra, Ali, Waris
Format: Article
Language:English
Subjects:
Boards of directors
Capital expenditures
Cash flow
Corporate governance
Emerging markets
Family owned businesses
Generalized method of moments
Hypotheses
Investments
R&D
Research & development
Stockholders
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Summary:This study contributes to the literature by exploring the relationship between board financial expertise and cash holding policy and further showing how this relation is moderated by multiple large shareholders (MLS). This research is based on agency theory, resource dependence, trade-off, and pecking order theory to confirm how resourceful directors screen cash holding practices. This study selects the 100 listed family firms from the emerging economy of Pakistan for the period of 2006–2017. With the use of static (random and fixed effect estimator) and dynamic (GMM) estimation techniques, this study reveals that the financial expertise of the board members has a significant negative impact on the firms’ cash holding level. Further, moderating effect of MLS between board financial expertise and cash holding is significantly positive due to weak corporate governance mechanisms in family firms. Moreover, the research has implications for developing corporate governance mechanism and the management of liquid assets that corporate management might use for their benefits.
ISSN:1076-2787
1099-0526
DOI:10.1155/2021/6397515