Cash Holdings and Corporate Governance: An Empirical Study of Publicly Listed Moroccan Companies

Proceedings of ‏The 3rd International Conference on Advanced Research in Social Sciences

Year: 2021

DOI: https://www.doi.org/10.33422/3rd.icarss.2021.03.335

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Cash Holdings and Corporate Governance: An Empirical Study of Publicly Listed Moroccan Companies

Boubker mouline, Hicham Sadok

ABSTRACT: 

Previous studies show that corporate governance is an essential determinant affecting cash holdings. This paper aims at examining the impact of corporate governance on firm cash holdings within the framework of the agency theory. Using a sample of 42 non-financial Moroccan companies publicly listed in the Casablanca Stock Exchange from 2007 to 2018, this study shows the relationship between several governance mechanisms and corporate cash holdings in Morocco. Several studies have already been carried out on the relationship between the corporate governance mechanism and the level of liquidity holdings by companies, but research on this subject is very limited in the context of developing countries, and almost non-existent to our knowledge in Morocco. This research should help boards of directors, shareholders, and creditors to take the necessary measures to limit managerial latitude in the allocation of available liquidity. We perform the analyses using the panel data methodology. The results of our research are relatively conclusive; they show that the level of cash holdings is significantly related to the shareholder structure, the degree of efficiency of the board of directors, and the company’s debt policy, which is in line with agency theory. These insights support the view that governance mechanisms influence companies’ liquidity holding policies.

Keywords: Morocco, cash holdings, corporate governance mechanisms, agency theory.