Cash Holdings and Firm Value: The Moderating Roles of Family Involvement and Board Structure

Extant corporate governance literature reveals that shareholders differ in their ownership strategies. This paper investigates how owner identity influences relationship between cash holdings and firm value and how board configuration moderates this influence. We focus on corporate cash holdings as a method to deduce the ownership strategies of family versus non-family shareholders. The findings reveal that corporate cash holdings have a positive influence on firm value in family firms, while the relationship turns negative in non-family firms. Out findings also show that board configuration that addresses the governance needs of a firm can enhance the positive effect of cash holdings on firm value in family firms while decreasing the negative effects in non-family firms. Our findings contribute to the research on the distinct impact of family shareholders on their firms while signifying the importance of fit between the ownerships structure of a firm and the configuration of the board of directors.