Board Characteristics, Political Connections, and Corporate Cash Holdings: The Role of Firm Size and Political Regime

Abstract

This paper examines the relationship of board characteristics with cash holding, and the interplay of political connections on this relationship. For this purpose, panel data of 150 non-financial firms ranging from 2001 to 2014 are used. We document that board characteristics are important predictors of a firm's cash holding in Pakistan. Theoretically, the findings mainly support agency theory. Consistent with prior studies, our empirical results show some statistical variations in large and small size sampled firms, and dictator and democratic regimes. Moreover, we investigate the interplay of political connections on the relationship of board characteristics and cash holding. Our findings support the complementary effect hypothesis.