The impact of ownership structure and business group affiliation on the corporate cash holdings Evidence from India

Abstract

The ownership concentration and business group affiliation are important features of emerging nations like India. However, the impact of controlling/family ownership on cash holdings of business group firms and standalone firms is not clear from the existing literature. Does agency problem or precautionary motive explain the cash holding in such scenario is an unexplored question? Further, collusion theory or monitoring theory which explains the relationship between the institutional holdings and cash holdings is another unexplored area. Thus, there is a need to study the relationship between cash holdings and controlling /family ownership in the presence of business groups and institutional holdings. newlineThe implication of excess cash holdings in the presence of controlling/family ownership, business group affiliation and institutional holdings is an important area to explore from the corporate governance perspective. There is a lot of research which emphasizes the high cash holdings around the world but whether these high cash holdings are expropriated or not by controlling/family ownership, business group affiliation and institutional ownership can shed light on the agency issues related to these ownership structures. Does institutional holding control the expropriation of excess cash by controlling/family ownership or do institutional holdings colludes with controlling/family ownership is an important question related to monitoring by institutional holdings? Thus, there is a need to study the relationship between the excess cash holdings and related party transactions in the presence of controlling/family ownership, business groups and institutional holdings.The role of board structure in corporate governance is very important but the newlineeffectiveness of board in cash holding literature is not explored in detail. It may be due to the pseudo independence (it refers to the condition where board independence is high but the newlinepresence of founder or its family members in key positions reduces the effectiveness