Abstract
This paper examines the relationship between corporate cash holdings and corporate governance mechanisms. We document that board size and non-management blockholder ownership are significantly related to the ratio of cash to net assets for a sample of publicly listed firms in Singapore. While the relationship between board size and cash holdings is positive and significant, non-management blockholder ownership is inversely related to cash holdings. Our findings are consistent with the agency cost hypothesis. Since firms with large boards and low non-management blockholder ownership are normally poorly governed, shareholders of such firms do not have much power in forcing the managers to distribute the excess cash to them. As a result, those firms hold higher cash balances than firms who have better control mechanisms (ie: small board and large non-management blockholder ownership).
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