Please use this identifier to cite or link to this item: http://hdl.handle.net/1783.1/2947

Two essays on corporate finance

Authors Kusnadi, Yuanto
Issue Date 2007
Summary Essay 1: Corporate Governance Mechanisms and Corporate Cash Holdings The first essay of the dissertation examines the relationship between firm-level corporate governance mechanisms and cash holdings, and their combined effect on firm value for a sample of firms listed in Singapore and Malaysia. We find that managers in politically-connected firms and those firms characterized with poor governance attributes (such as single leadership structure, large board size and small representation of outside directors in the audit committee) have more discretion over corporate cash policies, which leads to these firms holding larger cash reserves than firms with more effective governance. We further document that the incremental value of holding excess cash is negative for firms with poor governance. The discounts associated with these firms may reflect minority shareholders’ recognition of the possibility of managerial entrenchment. Essay 2: The Determinants of Corporate Cash Management Policy: Evidence from Around the World The second essay of the dissertation examines the determinants of corporate cash management policy across a broad sample of international firms. Using financial data from more than 104,000 firm-year observations from 43 countries over the period 1985-2004, we find that firms in countries with strong legal protection of minority investors are more likely to decrease (increase) their cash holdings in response to an increase in cash flow (stock price) than are firms in countries with weak legal protection. In addition, financially constrained firms display higher sensitivities of cash to both cash flow and stock prices than do financially unconstrained firms. The results are robust to alternative specifications. Our findings highlight the importance of both country-level institutional factors and firm-level financial constraint in managers’ corporate cash management policies.
Note Thesis (Ph.D.)--Hong Kong University of Science and Technology, 2007
Subjects
Language English
Format Thesis
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