Former CEO directors and cash holdings

This study investigates whether directors who are former CEOs have an impact on corporate cash holdings. We find that such directors are negatively related to corporate cash holdings because they play an effective monitoring role in reducing cash holdings caused by agency problems. Our results remained robust even after several robustness tests. This negative correlation between former CEO directors and cash holdings is more significant in non-state-owned companies and companies with less fierce product market competition, while the monitoring effect is more effective when the agency conflict between management and shareholders and agency conflict between the largest shareholder and minority shareholders is more serious. We also show evidence that former CEO directors could play an effective monitoring role irrespective of their position on the board.