Issues in multiple directorship and firm’s cash holding: a conceptual paper

Ihelsa Rumondang Siregar, Chyntia Afriani Utama

Abstract


This paper aims to explain the issues in board practices in corporate governance. The board practices that this paper wants to uncover are multiple positions by the director in a company. This paper specifically wants to discuss multiple positions held by the commissioners and directors in a public company in Indonesia. The method used for this conceptual paper is based on a literature review, journal articles, previous studies, online news related to the topic, and regulation related to the multiple directorships in Indonesia. Multiple directorships are when a director of a firm hold two or more position on another firm’s board. The practice of multiple directorships has two points of view; the first point of view told that multiple directorships are one of the elements in board practice that is important to create good corporate governance in reducing agency problems. But another point of view said that multiple directorships create a busy board, which results in an “over-committed” board. Although there is a lot of research on multiple directorship topics, such as the effect of multiple directorships on firm performance and firm value, further research is needed to uncover the effect of multiple directorships in reducing agency problems in a firm, such as an agency problem in a firm’s cash holding.

Full Text:

PDF

References


Booth, J. R., & Deli, D. N. (1996). Factors affecting the number of outside directorships held by CEOs. Journal ofFinancial Economics, 40 (1), 81-104.

Boubaker, Sabri & Derouiche, Imen & Lasfer, Meziane. (2014). Geographic Location, Excess Control Rights, and Cash Holdings. International Review of Financial Analysis.

Carpenter, M. A., & Westphal, J. D. (2001). The strategic context of external network ties: Examining the impact of director appointments on board involvement in strategic decision making. Academy of Management journal, 44 (4), 639-660.

Chou, Ting-Kai; Feng, Hsuan-Ling. (2018). Multiple directorships and the value of cash holdings. Review of Quantitative Finance and Accounting, 53(3).

Dittmar A, Mahrt-Smith J (2007) Corporate governance and the value of cash holdings. J Financ Econ 83:599–634

Fama, E.F. dan M.C. Jensen. 1983. Separation of Ownership and Control. Journal of Law and Economics, Vol.26 Pag. (301 – 325)

Jensen, M., C., dan W. Meckling, 1976. “Theory of the firm: Managerial behavior, agency cost and ownership structure”, Journal of Finance Economic 3:305- 360

Jiraporn P, Singh M, Lee CI (2009) Ineffective corporate governance: director busyness and board committee memberships. J Bank Financ 33:819–828

Mohammad Yousef Alghadi, Ahmad Rizal Mazlan, Adilah Azhari. The Impact of Board Gender and Multiple Directorship on Cash Holdings: Evidence from Jordan. International Journal of Finance and Banking Research. Vol. 5, No. 4, 2019, pp. 71-75.

Syarifuddin Anzari Santoso. Multiple Directorship, Political Connection and Earning Management: Evidence From Indonesian Public Listed Manufacturing Companies. (2016). Universitas Indonesia




DOI: http://dx.doi.org/10.33021/icfbe.v3i1.3828

Refbacks

  • There are currently no refbacks.



Editorial Office:

Faculty of Business President University 
Jalan Ki Hajar Dewantara Mekarmukti
Cikarang Utara, Bekasi, Jawa Barat


Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.