Yuanto Kusnadi

Corporate Cash Holdings and Corporate Governance Mechanisms

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).

The Real Effect of the Initial Enforcement of Insider Trading Laws

Based on a difference-in-differences approach, we find strong evidence that the initial enforcement of insider trading laws improves capital allocation efficiency. The effect is concentrated in developed markets and manifests shortly after the enforcement year. Cross-sectional analyses show that the improvement in capital allocation efficiency is more pronounced in countries with more opaque information environment before the enforcement year. Furthermore, the improvement is more pronounced for more financially constrained firms and firms with severer agency problems. Finally, we find increased accounting performance after the enforcement and the increase is positively associated with the improvement in capital allocation efficiency. Overall, our evidence suggests that the initial enforcement of insider trading laws improves capital allocation efficiency by increasing transparency and reducing market frictions arising from information asymmetry and agency problems.

Ownership Structure, Institutional Development, and Political Extraction: Evidence from China

This paper examines how ownership structure and institutional development influence the liquidity management and investment policies of firms, in response to the threat of political extraction in China. First, we document evidence that firms controlled by private entrepreneurs hold less cash reserves than their state-owned counterparts. In addition, cash holdings (investments) is positively (negatively) related to the strength of economic institutions. The results are consistent with the hypothesis that managers of private firms and firms located in provinces with weaker institutions have incentives to protect their assets from being expropriated by politicians, through holding less cash (which are easier to extract) and pursuing more investments in fixed assets (which are harder to extract). Finally, we find that firms with close connections to politicians hoard cash reserves and display lower investments than their non- connected counterparts. This suggests that political connections mitigate the threat of political extraction for those connected firms. JEL classification: D23; H7; K0; P2

Corporate Restructuring and Governance Implications: A Case Study of the Guoco Group

I study a series of restructuring activities undertaken by Guoco Group Limited in recent years and the implications on minority shareholders. The divestment of Dao Heng Bank Group to DBS Group reaped substantial benefits for Guoco, including an enormous cash reserves to fund future investments. However, the cash hoard was not implemented to the best use by Guoco’s managers. Subsequently, Guoco was involved in a number of share buybacks schemes. The share‐buybacks met strong resistance from the minority shareholders and eventually forced out the second largest shareholders. Guoco was also engaged in related party transaction involving its subsidiaries in the property development business. Overall, I find evidences suggesting that corporate restructuring activities enhance the controlling owner’s grip on the group at the expense of the minority shareholders.