The role of shareholders and creditors' rights in affecting cash holdings and firm value: a recent evidence from ASEAN.

Abstract

This study investigates the impact of shareholders' and creditors' rights (CR) on cash holdings (CH) and the firm value in emerging economies (the Association of Southeast Asian Nations) and based hypotheses on the characteristics of these markets. The sample contains 648 listed manufacturing firms from Malaysia, Singapore, Indonesia, Thailand, and the Philippines for the period 2005–2015. The results suggest that higher investor protection leads to the accumulation of more cash. Besides, a powerful country-level framework controls the value-destroying activities of firm managers. The results also support the flexibility hypothesis by providing evidence that strong CR in the economy lead to higher CH by the managers. Finally, investor protection in the presence of high CR reduces the incentive to hold more cash supporting stewardship theory in these markets. The results being economically robust are innovative and valuable to academics and policymakers in ASEAN.