Governance in the treasury

: the impact of corporate governance on cash holdings in the Eurozone

Abstract

The objective of this master thesis is to investigate the relationship between corporate governance and cash holdings in Eurozone companies with a timespan from 2014 to 2022. Using regression analysis, this research included firm-specific control variables, including firm size, leverage, market to book ratio, and cash flow to sales, along with time and industry fixed effects. The goal is to research on the impact of governance structures on cash management strategies. In the first regressions, there were a significant relationship between cash holdings and corporate governance. However, when time fixed effects were introduced, the governance score lost its explanatory power on cash holdings. Robustness checks such as introducing firm fixed effects and country fixed effects, dividing the sample before and post pandemic, changing the way dependent variables are computed and adding interaction terms and lagged variables all had the same results, governance was not statistically significant to explain changes in cash holdings. The conclusion of this thesis is that the governance score does not explain changes in cash holdings, except after the Covid-19, where it was found that after this period governance had a negative effect in explaining cash holdings.

Date of Award	24 Jan 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Diana Bonfim (Supervisor)