Relationship between Characteristics of Board of Directors and Excess Cash Holdings
AUTHORS
Jae-Min Lim,Ph.D. Student, Seoul School of Integrated Sciences and Technologies (First Author)
Sang-Cheol Lee,Professor, College of Business Administration, Dongguk University-Seoul
ABSTRACT
This study analyzed the influence of the ratio of external to internal board of directors, the tenures and shareholdings of long-term directors, and outside director expertise on a firm’s excess cash holdings. It utilized data from 2,133 Korean firms to estimate the corporate cash holdings model by Opler et al. (1999) [1]. According to the test results, the number of long-tenure outside directors had a significantly positive (+) influence on excess cash holdings, while shareholdings and outside director expertise had a negative (-) influence. Outside directors’ tenure had a larger influence than the expertise. Finally, the effect of shareholding ratio of directors on excess cash holdings was larger in firms with owner-CEOs than those with professional CEOs.
KEYWORDS
board characteristics; excess cash holdings; agency problems; CEO type
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