How Does Family Ownership and Cash Holding Effects the Firm Value? Evidence from Pakistan

Abstract

This study is conducted with an aim to investigate the impact of family ownership and cash holding on the firm value in Pakistan. For such purpose, the study selected non financial firms that are listed on the Pakistan Stock Exchange from year 2005 to 2014. As the sample data set of the study is panel data so that is why panel data regression model are applied. Study uses OLS regression as well as the random effect model. From these tests, results suggested that family ownership is having negative as well as significant relation with firm value. whereas the cash holding is also having the negative as well as significant relation with the firm value. Whereas for interaction term cash*family, the random effect model showed positive but insignificant relation with the firm value. Control variables of the study are having different results as the Ebit is significant negative relationship with the firm value whereas net assets are having positive as well as significant relation with the firm value. Interest expense is also having positive as well as significant relation with firm value while dividend paid in cash is having negative as well as insignificant relation with the firm value. Industry dummy also showed negative as well as significant relation with firm value.

Keywords: Family ownership, Firm value, Non-financial firms, Pakistan Stock Exchange, Cash holding,  Interaction term