Influence of governance bundles and directors’ social capital on cash holding in foreign cross-listed firms

Abstract

Copyright © 2022 The Authors. This paper provides new evidence on how both governance bundles and directors' social capital together can help to determine cash holdings for foreign cross-listed firms. Using a large cross-country sample of 1677 publicly listed firms from 32 countries during the period of 2004–2015, we find a positive relationship between governance bundles and cash holdings for foreign cross-listed firms with higher directors' social capital. We address potential issue of endogeneity. Therefore, our findings are robust to alternative model specifications and instrumentations and alternative measure of social capital. The findings of our study contribute to the inconclusive decision in the academic literature related to cash holdings, governance bundles, and directors' social capital, especially related to the foreign cross-listed firms. In addition, the findings can assist the stakeholders of foreign cross-listed firms to understand the intention of the firms' cash holdings and allow policy makers to identify the need of modification for governance structure by controlling the opportunistic behaviour of the firm manager.