Impact of Corporate Governance on the Cash Holdings of the Firms Listed on the Tehran Stock Exchange

As a concept related to several scientific fields such as accounting, economics, finance and law,  corporate governance motivates the individual and accumulative goals and reinforces the effective application of the resources and necessitates the responsiveness to the other stakeholders. Furthermore, implementing corporate governance might lead to the optimum allocation of the resources and enhancement of the information transparency and economic growth. This study investigates the impact of some corporate governance mechanisms on the firm value by comparing the value and usage of the cash holdings with the weak and strong corporate governance systems. The employed corporate governance mechanisms in this study are composed of the institutional ownership of the stocks, ownership concentration and CEO duality. To measure the firm value in terms of the value of the cash holding, the difference between the annual stock returns and the return of the three factor Fama-French model has been employed. The sample is composed of 102 listed firms on the Tehran Stock Exchange during a period from 2005 to 2009. Multivariate regression and Pearson correlation coefficients are used to test the research hypotheses. The findings reveal that the concentration of the institutional ownership and CEO duality are significantly and directly associated with the firm value.