FACTORS INFLUENCING CORPORATE CASH HOLDINGS: EVIDENCE FROM INDIA

Abstract

This thesis examines the factors affecting corporate cash holdings in Indian listed firms. Particularly, the thesis focuses on non-financial determinants of cash holdings. Since a vast majority of Indian listed firms are family firms and are known to significantly influence financial decisions of the firm, the first objective of the thesis is to examine the impact of family controlled firms on cash accumulation. Next, the thesis evaluates the role of the board of directors in affecting cash holdings. Board of Directors perform a monitoring role and protect minority investors from expropriation by managers and controlling shareholders. Thus, an effective board can impact cash held by a firm by curbing managerial discretion regarding the accumulation and use of cash. Five board attributes have been considered to investigate their impact on cash holdings of Indian listed firms. These board attributes are: board size, board independence, board busyness, women directors and duality. The last objective of the dissertation focuses on board gender diversity and its impact on cash holdings. Particularly, the thesis examines the channels through which women directors exert an influence on cash holdings of Indian listed firms. For this purpose, the thesis first evaluates the impact of the number of women on board in light of critical mass theory which says it takes minimum three women to significantly influence firm decisions. Next, the investigation focuses on the position of women directors on board and their consequent impact on cash holdings. The investigation considers whether the women directors are independent directors or executive directors. Lastly, the thesis sheds light on how the education of women directors can affect cash accumulation. In particular, the thesis evaluates the impact of highly educated women directors having either a master’s degree, Ph.D. degree or professional degree on cash holdings of Indian firms. It further investigates whether a master’s degree in business exert any influence on cash. The thesis considers a sample of non-financial firms listed on the S&P BSE 500 index. The sample period of the thesis is 2009-2018 for the first objective and 2009-2019 for the second and third objective. Firm-year observations with missing data on one or more variables have been excluded which resulted in an unbalanced panel data set. Based on the results of the Hausman test, a fixed effects model has been used to investigate the determinants of corporate cash holdings.