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Navigating cash management: The role of board co-option

Author

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  • Liu, Wenqiong
  • Li, Ziqi
  • Huang, Ho-Chuan

Abstract

This study examines the impact of board co-option on cash holdings in Chinese listed firms. The results show that co-opted directors significantly increase corporate cash reserves. This effect is particularly strong in state-owned enterprises (SOEs), where co-opted boards further amplify cash accumulation. However, financial constraints attenuate this relationship. Moreover, the increase in cash reserves associated with board co-option is partially driven by enhanced firm profitability, highlighting its mediating role. These findings offer new insights into the governance mechanisms influencing cash management in China.

Suggested Citation

  • Liu, Wenqiong & Li, Ziqi & Huang, Ho-Chuan, 2025. "Navigating cash management: The role of board co-option," Pacific-Basin Finance Journal, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:pacfin:v:89:y:2025:i:c:s0927538x24003469
    DOI: 10.1016/j.pacfin.2024.102594
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    More about this item

    Keywords

    Cash holdings; Board; Co-option;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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