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    Please use this identifier to cite or link to this item: http://tkuir.lib.tku.edu.tw:8080/dspace/handle/987654321/108164


    Title: Over-investment, the marginal value of cash holdings and corporate governance
    Authors: Huang, Chih Jen;Liao, Tsai-Ling;Chang, Yu-Shan
    Keywords: Corporate governance;Cash holdings;Agency costs;Over-investment
    Date: 2015/04/01
    Issue Date: 2016-11-02 02:10:48 (UTC+8)
    Publisher: Studies in Economic Analysis
    Abstract: Purpose
    – The purpose of this paper is to examine how investors’ valuation of cash holdings is related to firm-level investment.

    Design/methodology/approach
    – As prior studies note that holding excess cash serve as a driver to would be over-investing, and that over-investment imposes substantial agency costs on shareholders, the authors focus on the value implications of holding cash in the presence of over-investment from the perspective of shareholders.

    Findings
    – By examining the publicly traded companies on Taiwan stock market, the authors uncover that cash is valued less in firms with over-investment than in those with under-investment and the magnitude of over-investment is negatively related to the marginal value of cash holdings (MVCH). It reveals that investment activities impact the value that shareholders place on cash holdings. Moreover, further tests indicate that higher block holdings and the presence of independent directors on boards can effectively mitigate the negative impact of over-investment on the MVCH.

    Practical implications
    – This paper enhances the understanding of the valuation implications of cash reserves held by firms with over-investment and the effectiveness of governance structures in containing the detrimental effect of investment-related agency costs on the value of holding cash.

    Originality/value
    – This paper provides pioneering evidence that outside investors discount cash assets in over-investing firms to reflect their expectations that they will not receive the full benefit of these assets; and this paper extends the literature on corporate governance by assessing the role of governance mechanisms in reversing the negative relation between over-investment and the MVCH.
    Relation: Studies in Economics and Finance 32(2), pp.204-221
    DOI: 10.1108/SEF-07-2013-0101
    Appears in Collections:[會計學系暨研究所] 期刊論文

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