The Effect of Corporate Governance on Cash Holdings

Abstract

Purpose: This study aims to tests the effect of corporate governance on cash holdings empirically. This study proxies corporate governance into four proxies: family ownership, institutional ownership, size of the board of commissioners, and proportion of independent commissioners. In addition, this research uses five control variables, namely, bank relationship, company size, leverage, return on assets, and cash flows.Method: The samples were chosen based on the purposive sampling technique from consumer goods companies listed in the Indonesian Stock Exchange during 2015-2019, with 77 firm years. In order to test hypotheses, this study performed multiple regression analysis.Finding: The results showed that board independence negatively affect cash holdings, while family ownership, institutional ownership, and board size have not.Novelty: This study extends the limited previous research on the relationship between corporate governance and cash holdings, especially in the consumer goods industry sector listed on the Indonesia Stock Exchange for the period 2015-2019.

The Effect Of Corporate Governance On Cash Holdings

“…Based on the results of data processing, the results of this research are in line with the research of (Alghadi et al, 2021;Cambrea et al, 2022;Darma et al, 2021), who found that institutional ownership does not have a significant influence in determining cash holdings. The results of this research differ from those (Al-Najjar & Clark, 2017;Mawardi & Nurhalis, 2018), whose research found that a greater percentage of institutional ownership can significantly increase cash holdings.…”

“…Institutional Ownership and Cash Holdings. Institutional ownership is believed to increase the effectiveness of supervisory activities on management (Darma et al, 2021). (Al-Najjar & Clark, 2017;Mawardi & Nurhalis, 2018) Their research found that the greater the percentage of institutional ownership, the more cash holdings there are.…”

تأثير الملكية المؤسسية على الاحتفاظ بالنقدية: دليل من مصر( باللغة الانجليزية)

“…However, the results of (Brown et al, 2011) study revealed that the nature of the relationship between institutional ownership and corporate cash holdings depends mainly on whether the firm has short-term or long-term institutional ownership, and accordingly, the nature of the relationship can be determined. In contrast, the studies of (Darma et al;Alghadi et al;Odediyah et al;Ilyas et al;Afifa et al, 2021) explored that institutional ownership and corporate cash holdings are insignificantly related.…”

“…Also, the study of (Darma et al, 2021) attempted to examine how ownership structure influences the value of cash holdings empirically. The study used institutional ownership to assess ownership structure for a sample of 77 listed firms on the Indonesian Stock Exchange from 2015 to 2019.…”

Analisis Pengaruh Intellectual Capital, Mekanisme Good Corporate Governance, dan Kinerja Lingkungan Terhadap Nilai Perusahaan

“…Perusahaan yang memperaktikan GCG akan mengalami perbaikan citra, peningkatan kerja, dan peningkatan nilai perusahaan. Perusahaan yang menerapkan tata kelola perusahaan dengan baik, maka akan lebih banyak memberikan informasi yang dapat digunakan untuk mengurangi asimetri informasi (Darma et al, 2021). Dengan adanya pelaksanaan GCG, diharapkan perusahaan juga dapat meningkatkan keperdulian terhadap lingkungan, kondisi tempat kerja, hubungan perusahaan, investasi sosial perusahaan, dan akses capital serta image perusahaan dimasyarakat menjadi baik.…”