This study contributes to the literature by exploring the relationship between board financial expertise and cash holding policy and further showing how this relation is moderated by multiple large shareholders (MLS). This research is based on agency theory, resource dependence, trade-off, and pecking order theory to confirm how resourceful directors screen cash holding practices. This study selects the 100 listed family firms from the emerging economy of Pakistan for the period of 2006–2017. With the use of static (random and fixed effect estimator) and dynamic (GMM) estimation techniques, this study reveals that the financial expertise of the board members has a significant negative impact on the firms’ cash holding level. Further, moderating effect of MLS between board financial expertise and cash holding is significantly positive due to weak corporate governance mechanisms in family firms. Moreover, the research has implications for developing corporate governance mechanism and the management of liquid assets that corporate management might use for their benefits.
Family businesses are a valuable and well-known corporate name all over the world. However, controlling families have a clear incentive to obtain private benefits via asset expropriation from minority owners and to take activities that diminish the firms' value especially in emerging economies. A strong governance structure protects against these practices and affects long-term success by lowering them. This study adds to this scope by examining the effect of board independence, board size, leverage, dividend distribution, and company size on cash holding in the case of Pakistani listed family firms. Secondary data of sample of 212 family listed firm for the period of 2010-2017 from published annual reports and corporate governance reports are used. The static and dynamic models: fixed effect (F.E.), random effect (RE), and generalized method of moment (GMM) are the critical tools of evaluation in this study. Results show that board independence negatively affects cash holding, indicating that governance plays an active part in family businesses, whereas board size positively impacts cash holding, and demonstrating inefficient governance. Finally, study has policy guidelines for shareholders, and all other stakeholders.
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