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Corporate Governance And Cash Holdings: A Comparative Analysis Of Chinese And Indian Firms

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  • Ohannes G. Paskelian
  • Stephen Bell
  • Chu V. Nguyen

Abstract

In this study, we examine the impact of concentrated ownership on cash valuation and the level of cash holdings in firms the emerging nations of China and India. Agency theories suggest that firms with high levels of concentrated ownership are subject to greater extraction of private benefits from cash holdings. Our study utilizes Chinese firms data from 1993-2006 and Indian firms data from 2003-2006. We examine the relationship between firm valuation and cash holdings with different levels of governmental ownership concentration, family ownership levels and foreign ownership levels. Our findings show that Chinese firms with high levels of government ownership have larger cash holdings suggesting more opportunities for private benefits extraction thus leading to lower firm valuation. In contrast, we find that Indian firms with high level of family ownership have low cash holdings and record better performance. Chinese investors view governmental ownership as a determinant that reduces firm value. Indian investors see high levels of family ownership as a factor that enhances firm value. This study enhances the body of knowledge concerning the nature of cash holdings and firm value in emerging nations of China and India.

Suggested Citation

  • Ohannes G. Paskelian & Stephen Bell & Chu V. Nguyen, 2010. "Corporate Governance And Cash Holdings: A Comparative Analysis Of Chinese And Indian Firms," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(4), pages 59-73.
    • Handle: RePEc:ibf:ijbfre:v:4:y:2010:i:4:p:59-73
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    Cited by:

    1. KHAN, Asad & BIBI, Memoona & TANVEER, Sarfaraz, 2016. "The Impact Of Corporate Governance On Cash Holdings: A Comparative Study Of The Manufacturing And Service Industry," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 20(3), pages 40-79.
    2. Khalil Jebran & Amjad Iqbal & Kalim Ullah Bhat & Muhammad Arif Khan & Mustansar Hayat, 2019. "Determinants of corporate cash holdings in tranquil and turbulent period: evidence from an emerging economy," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-12, December.
    3. Dana Hassan & Majd Iskandrani & Hadeel Yaseen & Mohammad AlMaharmeh, 2024. "Board Composition and Cash Hoarding: Evidence from Jordanian Small- and Medium-Sized Enterprises," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 13, January.

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    More about this item

    Keywords

    Cash Holdings; ownership structure; corporate governance; Chinese firms; Indian firms; firm valuation.;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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