Alignment or Entrenchment? Evidence From Cash Holdings in Thailand

Abstract

This paper examines the relationship between managerial ownership and cash holdings of non-financial firms in Thailand over the period 2011 to 2015. The results indicate that higher managerial ownership is associated with lower cash holdings, suggesting that managers of Thai firms do not hoard cash for taking private benefits. The findings therefore lend support to the incentive-alignment hypothesis. In addition, the evidence indicates that board size has a negative impact on cash holdings while board independence does not play a significant role. Further, it is found that profitability, firm size, growth opportunities and cash flow have positive effects on cash holdings whereas leverage has a nonlinear impact on cash reserves.

Keywords: cash holdings, managerial ownership, board size, board independence, corporate governance

JEL Classification: G32