The Moderating Role of Financial Constraints and Corporate Governance on the Relationship between CEO Managerial Ability and the Marginal Value of Cash

Document Type : Original Article

Authors

1 Assistant Professor, Department of Accountancy, Hakim Tos High Education Institute, Mashhad, Iran

2 Corresponding Author: Ahmad Arian Tabar, PH.D. Candidate in Financial Engineering and Instructor of the Accounting and Management Group, Mashhad Branch, Islamic Azad University, Mashhad, Iran

3 Venus Radman, MAin Accountancy, Islamic Azad University, Flavarjan, Iran

Abstract

Managers can choose to have cash in the company, distribute it to shareholders, or use it as an investment. Because top executives can get more accurate information about investment opportunities, they can have better investments and are more likely to achieve the desired result, so they can. Cash management can be expected to be better in them as well. A strong corporate governance mechanism can also critically increase the marginal value of cash. Cash value can also be presented to the power of corporate governance in a company. The main purpose of this study is to examine the moderating role of financial constraints and corporate governance on the relationship between managers' ability and cash margin value. The statistical population of this research is the companies accepted in Tehran Stock Exchange and its statistical sample includes data from 105 companies for the period of 6 years 2014-2020. Sampling method is a systematic method of elimination. The method used to estimate the multi-variable regression model is the combination method. The results of the research showed that managers' ability to affect the marginal value of cash has a positive effect. Also, the results showed that in firms with financial constraints, the effect of directors' ability to exceed the marginal value of cash is greater. In addition, it was found that in companies with stronger corporate governance, the impact of managers' ability to cash out more marginally was greater. And the moderation role of corporate governance is based on the relationship between the ability of managers and the marginal value of cash.

Keywords

References

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Budget and Finance Strategic Research
Volume 2, Issue 3 - Serial Number 7
Autumn Quarterly
December 2021
Pages 183-217

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History

  • Receive Date: 01 November 2021
  • Revise Date: 27 December 2021
  • Accept Date: 27 December 2021

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