Corporate governance, cash holdings and firm value of quoted non-financial firms in Nigeria (2008-2013)
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Date
2015
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Economics, Obafemi Awolowo University
Abstract
The study examines the patterns of cash holdings and firm value of quoted non-financial firms in Nigeria over the period of 2008 to 2013. It also examines the effect of corporate governance on cash holdings; and investigate the interactive effect of corporate governance and cash holdings on firm value of quoted non-financial firms in Nigeria.
Secondary data was used for the study. Annual data from 2008 to 2013 on variables such as cash, total directors, executive directors, non-executive directors, directors’ equity ownership, market value of equity, book value of total liabilities, total shares, total assets, total debt, largest shareholders and cash flow were sourced from annual financial reports and statement of accounts of 50 selected quoted non-financial firms in Nigeria. Both descriptive statistic and econometric techniques of analysis were used in a panel setting. Under descriptive techniques, tables and graphs were employed while Generalised Method of Moment (GMM) was adopted as the econometric tool.
The results from the descriptive statistic show that the pattern and growth of cash holdings varies among the sectors on yearly basis. The summarized mean value of cash holdings for the whole sample firms reveals that the highest cash holding is in 2013 with 32.54 percent and the lowest in 2010 with 22.78 percent. The trend of cash holding over the period covered was unstable and its pattern was also fluctuating. Furthermore, the pattern of firm value in Nigeria between the period of 2008 and 2013 can be described as unstable.
The GMM estimate reveals that ownership concentration has a significant and negative effect on cash holdings (t = -2.1083, p < 0.01). Conversely, the study finds that managerial entrenchment (t = 3.5945, p < 0.01), and board independence (t = 1.9913, p < 0.05) have positive and significant impacts on cash holdings of sampled firms in Nigeria. Also, the study reveals that managerial ownership (t = 0.3828, p > 0.05) and board size (t = 0.7431, p > 0.05) have positive and insignificant effect on cash holdings. Furthermore, the interactive effect of the variables on firm value revealed that managerial entrenchment and cash has a significant and negative effect on firm’s value (t = -4.7436, p < 0.01). On the other hand, ownership concentration and cash (t = 2.8308, p < 0.01), board independence and cash (t = 2.0359, p < 0.05) has a positive and significant effect on firm’s value. The study also reveals that managerial ownership and cash (t = -0.1361, p > 0.05) and board size and cash (t = -1.8494, p > 0.05) have a negative and insignificant impact on firm’s value.
The study concludes that there is a positive effect of cash holdings on firm value for firms with good firm-level corporate governance in Nigeria.
Description
xii,92p
Keywords
Cash holding, Corporate governance, Financial firms, Non-financial firms
Citation
Abanikanda, E.O. (2015). Corporate governance, cash holdings and firm value of quoted non-financial firms in Nigeria (2008-2013). Obafemi Awolowo University