3. Corporate Governance and Cash Holdings

This chapter delves into the intricate relationship between corporate governance mechanisms and cash holdings, focusing on how different governance attributes influence the level of accumulated cash in non-financial firms. The study highlights the significant role of board independence and non-controlling large shareholders in reducing excess cash, which can be misused for self-serving activities. It also explores how these governance mechanisms vary across different firm characteristics such as CEO tenure, firm size, age, growth opportunities, financial condition, and industry concentration. The empirical analysis, conducted on a sample of NIFTY 500 firms from FY 2010 to FY 2019, reveals that the effectiveness of corporate governance mechanisms is contingent upon the firm's lifecycle stage and industry structure. The findings underscore the importance of robust governance practices in mitigating agency conflicts and ensuring optimal cash management strategies. This comprehensive study provides valuable insights into the dynamics of cash holdings and corporate governance, offering practical implications for policymakers, investors, and corporate managers.