TY - JOUR
T1 - Multiple directorships and the value of cash holdings
AU - Chou, Ting Kai
AU - Feng, Hsuan Ling
N1 - Funding Information:
We thank Mia Twu, Chia-Ling Lee, Yueh-Chiao Lin, Lee-Young Cheng, workshop participants at National Cheng Kung University, National Cheng Chi University, National Chung Cheng University, Chung Yuan Christian University, and National Dong Hwa University, and participants at the 2014 AAA Annual Meeting, the 22nd Conference on the Theories and Practices of Securities and Financial Markets, the 2014 International Conference of Taiwan Finance Association for helpful comments and suggestions. Ting-Kai Chou gratefully acknowledges financial support from the National Science Council of Taiwan (NSC 101-2410-H-194-044). The paper won the best paper award at the 2014 International Conference of Taiwan Finance Association.
PY - 2019/10/1
Y1 - 2019/10/1
N2 - This study examines the impact of multiple directorships on the value destruction associated with increases in cash holdings. We find that the marginal value of cash increases with multiple directorships. Furthermore, the positive relationship between cash value and multiple directorships is more pronounced for firms with higher managerial agency problems. Additional analyses suggest that multi-board directors limit a firm’s holdings of excess cash, and especially directors having current industry affiliations have better ability to perform their monitoring function. Firms with multi-board directors make better cash acquisitions. Multiple directorships improve subsequent operating performance associated with capital expenditures and R&D investments. When firms have limited investment opportunities, multiple directorships result in more dividend payouts of cash. Collectively, our results suggest that multiple directorships are associated with a more efficient use of cash, thereby providing direct benefits to shareholders.
AB - This study examines the impact of multiple directorships on the value destruction associated with increases in cash holdings. We find that the marginal value of cash increases with multiple directorships. Furthermore, the positive relationship between cash value and multiple directorships is more pronounced for firms with higher managerial agency problems. Additional analyses suggest that multi-board directors limit a firm’s holdings of excess cash, and especially directors having current industry affiliations have better ability to perform their monitoring function. Firms with multi-board directors make better cash acquisitions. Multiple directorships improve subsequent operating performance associated with capital expenditures and R&D investments. When firms have limited investment opportunities, multiple directorships result in more dividend payouts of cash. Collectively, our results suggest that multiple directorships are associated with a more efficient use of cash, thereby providing direct benefits to shareholders.
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U2 - 10.1007/s11156-018-0762-1
DO - 10.1007/s11156-018-0762-1
M3 - Article
AN - SCOPUS:85053682440
VL - 53
SP - 663
EP - 699
JO - Review of Quantitative Finance and Accounting
JF - Review of Quantitative Finance and Accounting
SN - 0924-865X
IS - 3
ER -