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| Author: | Dittmar, A. Mahrt-Smith, J. |
| Title: | Corporate governance and the value of cash holdings |
| Journal: | Journal of Financial Economics
2007 : MAR, VOL. 83:3, p. 599-634 |
| Index terms: | corporate governance company value cash management |
| Freeterms: | operating performance |
| Language: | eng |
| Abstract: | The study compares the value and use of cash holdings in poorly and well-governed firms. The value of a dollar of cash is found to be substantially less in firms with poor corporate governance, whereas good governance approximately doubles this value. Study shows also that firms with poor corporate governance dissipate cash quickly in ways that significantly reduce operating performance. In conclusion, poorly governed firms waste excess cash resources and consequently destroy firm value. Also, if the firm is well governed, the negative impact on future operating performance caused by large cash holdings is cancelled out. |
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