Effects of board of directors’ characteristics on a firm’s excess cash holdings

Using 6,962 Korean listed firms observed between 2000 and 2014, this study investigated the effects of the board of directors’ characteristics on a firm’s excess cash holdings. The results of the regression analysis show that directors in service for more than ten years have a positive and significant influence on excess cash holdings, while shareholdings by directors have a significantly negative impact on excess cash holdings. Moreover, outside directors holding a PhD or professorship in business administration have a significantly negative influence on a company’s excess cash holdings. The impact of long-serving directors (beyond ten years) and shareholdings by directors on excess cash holdings is greater than that exerted by directors with a PhD or professorship in business administration. Finally, the effect of the shareholding ratio of directors on excess cash holdings is more substantial in firms with owner-CEOs rather than professional CEOs.