The Impact of Corporate Governance on Cash Holdings in the Context of Oman

  • DWAIKAT, Nizar (Business Faculty, Arab Open University - Palestine Branch)
  • Received : 2022.10.10
  • Accepted : 2023.01.15
  • Published : 2023.01.30


This study investigates the impact of corporate governance (defined as companies' ownership structure and board of directors' characteristics) on cash holdings in the context of Oman. This study leverages a quantitative panel pooled regression on a dataset of Omani non-financial firms from 2009-2015. The findings of this study are generally in line with the predictions of Agency Theory and Mentoring and Busyness Hypotheses. The analysis demonstrates that a large stockholder size has a significant positive relationship with cash holding. Meanwhile, a positive (but insignificant) relationship was also found between institutional ownership and cash holding. Furthermore, state ownership was found to exhibit a significant negative relationship with cash holding. In terms of the board of directors' traits, this study's findings suggest that board sizes have a positive (but insignificant) relationship with cash holding. Furthermore, busy and independent boards were found to have a significant positive relationship with cash holding. The above findings suggest that boards with such traits are less effective in providing oversight on managers' actions, which would then increase Omani non-financial firms' cash holdings.



  1. Adams, R. B., Hermalin, B. E., & Weisbach, M. S. (2010). The role of boards of directors in corporate governance: A conceptual framework and survey. Journal of Economic Literature, 57(5), 998-1001.
  2. Al-Najjar, B. (2015). The effect of governance mechanisms on SME cash holdings: Evidence from the UK. Journal of Small Business Management, 23(2), 303-320.
  3. Al-Najjar, B., & Clark, E. (2017). Corporate governance and cash holdings in MENA: Evidence from internal and external governance practices. Research in International Business and Finance, 39, 1-12.
  4. Alghadi, M. Y., Al Nsour, I. R., & Aizyadat, A. A. K. (2021). Ownership structure and cash holdings: Empirical evidence from Saudi Arabia. Journal of Asian Finance, Economics, and Business, 8(7), 323-0331.
  5. Anderson, R. W., & Hamadi, M. (2009). Large powerful shareholders and cash holding.
  6. Attig, N., Fong, W. M., Gadhoum, Y., & Lang, L. H. P. (2006). Effects of large shareholding on information asymmetry and stock liquidity. Journal of Banking and Finance, 30(10), 2875-2892.
  7. Attig, N., El Ghoul, S., Guedhami, O., & Rizeanu, S. (2009). Multiple large shareholders and the value of cash holdings. Financial Management, 5(1), 11-19.
  8. Bagh, T., Asif, K. H. A. N., M., Meyer, N., Sadiq, R., & Kot, S. (2021). Determinants of corporate cash holdings among Asia's emerging and frontier markets: Empirical evidence from the non-financial sector. Journal of Asian Finance, Economics, and Banking, 8(6), 661-0670.
  9. Ben-Nasr, H., Boubakri, N., & Cosset, J. C. (2012). The political determinants of the cost of equity: Evidence from newly privatized firms. Journal of Accounting Research, 50(3), 605- 646.
  10. Black, S., & Bhagat, B. (2000). Board independence and long-term firm performance. Colorado: University of Colorado.
  11. Borisova, G., Brockman, P., Salas, J. M., & Zagorchev, A. (2012). Government ownership and corporate governance: Evidence from the EU. Journal of Banking and Finance, 36(11), 2917-2934.
  12. Boubaker, S., Derouiche, I., & Nguyen, D. K. (2013). Does the board of directors affect cash holdings? A study of French listed firms. Journal of Management and Governance, 19(2), 341-370.
  13. Brown, C. A., Chen, Y., & Shekhar, C. (2011). Institutional ownership and firm cash holdings. SSRN Electronic Journal, 82, 152-163.
  14. Bushee, B. J., & Noe, C. F. (2000). Corporate disclosure practices, institutional investors, and stock return volatility. Journal of Accounting Research, 38, 171.
  15. Chen, R., & Nash, R. (2015). State ownership and corporate cash holdings: Evidence from privatization Journal of Management and Finance, 17(11), 4451-4460.
  16. Chen, Y. R. (2008). Corporate governance and cash holdings: Listed new economy versus old economy firms. Corporate Governance: An International Review, 16(5), 430-442.
  17. Coles, J. L., Daniel, N. D., & Naveen, L. (2014). Co-opted boards. Review of Financial Studies, 27(6), 1751-1796.
  18. Corwin, S. A. (2003). The determinants of underpricing for seasoned equity offers. Journal of Finance, 58(5), 2249-2279.
  19. Dahya, J., Dimitrov, O., & McConnell, J. J. (2008). Dominant shareholders, corporate boards, and corporate value: A cross-country analysis. Journal of Financial Economics, 87(1), 73 -100.
  20. Dittmar, A., Mahrt-Smith, J., & Servaes, H. (2003). International corporate governance and corporate cash holdings. Journal of Financial and Quantitative Analysis, 38(1), 111.
  21. Do Thi, T. N. (2018). Cash holding, Corporate governance mechanisms and Firm value in transition economies: A study of listed corporations in Vietnam [Unpublished Doctoral Thesis]. Tomas Bata University, Zlin.
  22. Dwaikat, N., & Queiri, A. (2014). The relationship between ownership structure and firm's performance: An empirical evidence from Palestine. International Journal of Business and Management, 9(12), 49-61.
  23. Eckbo, B. E., Masulis, R. W., & Norli, O. (2007) Security offerings. In B. Espen (Ed.), Handbook of empirical corporate finance (pp. 223-350). Elsevier: North-Holland, Amsterdam.
  24. Fama, E. F., & Jensen, M. C. (1983). Agency problems and residual claims. Journal of Law and Economics, 26(2), 327-349.
  25. Ferreira, M. P., & Vicente, E. F. R. (2020). Effect of the structure of the board of directors on cash holdings of publicly traded companies. Contemporary Journal of Economics and Management, 18, 20, 275-289.
  26. Fich, E. M., & Shivdasani, A. (2006). Are busy boards effective monitors? Journal of Finance, 61(2), 689-724.
  27. Field, L. C., Lowry, M., & Mkrtchyan, A. (2011). Are busy boards detrimental? [Abstract]: Are Busy Boards Detrimental? Abstract. Journal of Financial Economics, 109(1), 814-865.
  28. Ginglinger, E., & Saddour, K. (2012). Cash holdings, corporate governance, and financial constraints. SSRN Electronic Journal, 7, 575.
  29. Hadjaat, M., Yudaruddin, R., & Riadi, S. S. (2021). The impact of financial distress on cash holdings in Indonesia: Does business group affiliation matter? Journal of Asian Finance, Economics, and Business, 8(3), 373-381.
  30. Harford, J., Mansi, S. A., & Maxwell, W. F. (2008) Corporate governance and firm cash holdings in the US. Journal of Financial Economics, 87(3), 535-555.
  31. Ivalina, K., & Lins, K. V. (2004). International evidence on cash holdings and expected managerial agency problems [Unpublished thesis]. The University of Utah.
  32. Javadi, S., Mollagholamali, M., Nejadmalayeri, A., & Al-Thaqeb, S. (2021) Corporate cash holdings, agency problems, and economic policy uncertainty. International Review of Financial Analysis, 77.
  33. Jebri, A. (2013). The effect of large controlling shareholder's presence and Board of Directors on firm value. International Journal of Accounting and Financial Reporting, 3(2), 180.
  34. Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. SSRN Electronic Journal, 76(2), 323-329.
  35. Jiraporn, P., Singh, M., & Lee, C. I. (2009). Ineffective corporate governance: Director busyness and board committee memberships. Journal of Banking and Finance, 33(5), 819-828.
  36. Kusnadi, Y., Yang, Z., & Zhou, Y. (2015). Institutional development, state ownership, and corporate cash holdings: Evidence from China. Journal of Business Research, 68(2), 351-359.
  37. Lasfer, M. A. (2006). The interrelationship between managerial ownership and board structure. Journal of Business Finance and Accounting, 33(7-8), 1006-1033.
  38. Megginson, W. L., Ullah, B., & Wei, Z. (2014). State ownership, soft-budget constraints, and cash holdings: Evidence from China's privatized firms. Journal of Banking and Finance, 48(March), 276-291.
  39. Myers, S. C. (1997). Determinants of corporate borrowing. Journal of Financial Economics, 5(2), 147-175.
  40. Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221.
  41. Myers, S. C., & Rajan, R. G. (1998). The paradox of liquidity. Quarterly Journal of Economics, 113(3), 733-771.
  42. Nguyen, D. T., Diaz-Rainey, I., & Gregoriou, A. (2012). Financial development and the determinants of capital structure in Vietnam. SSRN Electronic Journal, 11, 483.
  43. Okuda, H., Thi, L., & Nhung, P. (2010). The determinants of the fundraising structure of listed companies in Vietnam: Estimation of the effects of government ownership. Economic Research, 10, 1145-1152.
  44. Ozkan, A., & Ozkan, N. (2004). Corporate cash holdings: An empirical investigation of UK companies. Journal of Banking and Finance, 28(9), 2103-2134.
  45. Paskelian, O. G., Bell, S., & Nguyen, C. V. (2010). Corporate governance and cash holdings: A comparative analysis of Chinese and Indian firms. International Journal of Business and Finance, 4(4), 59-74.
  46. Peng, M. W., Bruton, G. D., Stan, C. V., & Huang, Y. (2016). Theories of the (state-owned) firm. Asia Pacific Journal of Management, 33(2), 293-317.
  47. Pinkowitz, L., Stulz, R., & Rohan, W. (2006). Does the contribution of corporate cash holdings and dividends to firm value depend on governance? A cross-country analysis. Journal of Finance, 22(6), 2725-2751.
  48. Raheja, C. G. (2005). Determinants of board size and composition: A theory of corporate boards. SSRN Electronic Journal, 6, 77.
  49. Shleifer, A., & Vishny, R. W. (1986). Large shareholders and corporate control. Journal of Political Economy, 94(3), 461-488.
  50. Shleifer, A., & Vishny, R. W. (1997). A survery of Corporate Governance. Journal of Finance, 52(2), 737-783.
  51. Tarkovska, V. (2013). Busy boards, cash holding, and corporate liquidity: Evidence from Uk Panel Data. Financial Management, 16, 36-42.
  52. Taufil Mohd, K. N., Latif, R. A., & Saleh, I. (2015). Institutional ownership and cash holding. Indian Journal of Science and Technology, 8(32), 1-6.
  53. Thu, P. A., & Khuong, N. V. (2018). Factors effect on corporate cash holdings of the energy enterprises listed on Vietnam's stock market. International Journal of Energy Economics and Policy, 8(5), 29-34.
  54. Ullah, H., Saeed, G., & Alam, Z. (2014). Corporate ownership structure and firm excess cash holdings: Evidenced from emerging markets, Pakistan. Abasyn University Journal of Social Sciences, 7(2), 16-47.
  55. Yeh, Y. H., & Woidtke, T. (2005). Commitment or entrenchment?: Controlling shareholders and board composition. Journal of Banking and Finance, 29(7), 1857-1885.