Institutional and executive shares account for the majority of ownership and have a considerable impact on the firm’s future financing, investment, earnings, and other corporate decision-making activities. This study aims to investigate the statistical links of institutional ownership and executive ownership on financial earnings and the corporate cash level of non-financial firms using a balanced dataset of 200 non-financial listed firms in PSX (Pakistan Stock Exchange) during the period 2013 to 2018. Among many advanced econometric methods, fixed effect models with pooled ordinary least square (OLS) estimation were found more appropriate to our investigation. Our main findings are twofold. The outcome of our analysis indicates that institutional ownership and executive ownership are significantly related to financial earnings. Further, our results suggest that there is a significant relationship between executive ownership and corporate cash level, as well as a positive and significant relationship between institutional ownership and finance. The cash level of firms can only be identified and predicted through executive ownership in a developing economy like Pakistan. This study provides insightful information for non-financial industry shareholders and policymakers in Pakistan.

1. Attia EF, Khémiri W, Mehafdi M. Does ownership structure reduce earnings manipulation practice of Egyptian listed firms? Evidence from a dynamic panel threshold model. Future Business Journal. 2023; 9(1). doi: 10.1186/s43093-023-00213-4

2. Missaoui I, Brahmi M, Rajeb JB. Ownership structure management and its effect on dividend policy in the Tunisian stock exchange enterprises: an empirical study. International Journal of Technology Transfer and Commercialisation. 2022; 19(1): 83. doi: 10.1504/ijttc.2022.123084

3. Dong N, Wang F, Zhang J, et al. Ownership structure and real earnings management: Evidence from China. Journal of Accounting and Public Policy. 2020; 39(3): 106733. doi: 10.1016/j.jaccpubpol.2020.106733

4. Valent C, Yanti Y. Institutional Ownership, Board Size, Growth Opportunities, Net Working Capital and Cash Holding. International Journal of Application on Economics and Business. 2023; 1(1): 705–715. doi: 10.24912/ijaeb.v1i1.705-715

5. Attia EF, Ismail TH, Mehafdi M. Impact of board of directors attributes on real-based earnings management: further evidence from Egypt. Future Business Journal. 2022; 8(1). doi: 10.1186/s43093-022-00169-x

6. Afifa MA, Saleh I, Haniah F. Direct and Mediated Associations Among Ownership Structure, Cash Holdings and Firm Value: The Case of Jordanian Insurance Firms. Vision: The Journal of Business Perspective. 2021; 25(4): 471–482. doi: 10.1177/0972262920983989

7. Zhang D, Ma S, Pan X. Institutional investors, controlling shareholders and CEO pay‐performance relationship: evidence from China. Accounting & Finance. 2019; 61(1): 467–498. doi: 10.1111/acfi.12580

8. Ali MJ, Biswas PK, Chapple L, et al. Institutional ownership and earnings quality: Evidence from China. Pacific-Basin Finance Journal. 2024; 84: 102275. doi: 10.1016/j.pacfin.2024.102275

9. Ward C, Yin C, Zeng Y. Institutional investor monitoring motivation and the marginal value of cash. Journal of Corporate Finance. 2018; 48: 49–75. doi: 10.1016/j.jcorpfin.2017.10.017

10. Din SU, Arshad Khan M, Khan MJ, et al. Ownership structure and corporate financial performance in an emerging market: a dynamic panel data analysis. International Journal of Emerging Markets. 2021; 17(8): 1973–1997. doi: 10.1108/ijoem-03-2019-0220

11. Akhtar T. Are the motives of holding cash differing between developed and emerging financial markets? Kybernetes. 2023; 53(5): 1653–1681. doi: 10.1108/k-11-2022-1527

12. Opler T, Pinkowitz, L, Stulz, R, et al. The determinants and implications of corporate cash holdings. Journal of Financial Economics. 1999; 52(1): 3–46.

13. Salehi M, Bazrafshan A, Hosseinkamal M. The relationship between supervision quality, CEO’s ability and authority with firm performance. Journal of Facilities Management. 2021; 19(2): 150–173. doi: 10.1108/jfm-08-2020-0056

14. Dinh TQ, Calabrò A, Campopiano G, et al. The Impact of Politically Connected CEOs and Boards of Directors on Firm Performance: A Study of Vietnamese Family and Nonfamily Firms. Entrepreneurship Theory and Practice. 2021; 46(5): 1284–1316. doi: 10.1177/1042258720985477

15. Ngatno, Apriatni EP, Youlianto A. Moderating effects of corporate governance mechanism on the relation between capital structure and firm performance. Cogent Business & Management. 2021; 8(1). doi: 10.1080/23311975.2020.1866822

16. Wang P, Zhang X, Wang T, et al. Executive compensation controls and corporate cash holdings. PLOS ONE. 2023; 18(9): e0285387. doi: 10.1371/journal.pone.0285387

17. Sun W, Yin C, Zeng Y. Precautionary motive or private benefit motive for holding cash: Evidence from CEO ownership. International Review of Financial Analysis. 2023; 90: 102820. doi: 10.1016/j.irfa.2023.102820

18. Gupta CP, Bedi P. Corporate cash holdings and promoter ownership. Emerging Markets Review. 2020; 44: 100718. doi: 10.1016/j.ememar.2020.100718

19. Zhou M, Cao J, Lin B. CEO organizational identification and firm cash holdings. China Journal of Accounting Research. 2021; 14(2): 183–205. doi: 10.1016/j.cjar.2021.03.001

20. Wajid A, Safi UK. Corporate Governance and Cash Holdings: Evidence from Family Controlled and Non-Family Business in Pakistan. Pakistan Journal of Applied Economics: Special Issue. 2016.

21. Alghadi MY, Al Nsour IR, Aizyadat A. Ownership Structure and Cash Holdings: Empirical Evidence from Saudi Arabia. Journal of Asian Finance, Economics and Business. 2021; 8(7): 0323–0331.

22. Jensen MC, Meckling WH. Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics. 1976; 3: 305–360.

23. Shleifer A, Vishny R. Large Shareholders and Corporate Control. Journal of Political Economy. 1986; 94: 461–488.

24. Koh JH, Jang S. Cash Holdings of Hotel Firms: The Financial Constraints Perspective. In: Massachussets U (editor). Research Conference in Hospitality and Tourism; 2011.

25. Shleifer A, Vishny RW. A Survey of Corporate Governance. The Journal of Finance. 1997; 52(2): 737–783. doi: 10.1111/j.1540-6261.1997.tb04820.x

26. Bhattacharya PS, Graham MA. On institutional ownership and firm performance: A disaggregated view. Journal of Multinational Financial Management. 2009; 19(5): 370–394. doi: 10.1016/j.mulfin.2009.07.004

27. Kansil R, Singh A. Institutional ownership and firm performance: evidence from Indian panel data. International Journal of Business and Emerging Markets. 2018; 10(3): 250. doi: 10.1504/ijbem.2018.092993

28. Tsouknidis DA. The effect of institutional ownership on firm performance: the case of U.S.-listed shipping companies. Maritime Policy & Management. 2019; 46(5): 509–528. doi: 10.1080/03088839.2019.1584408

29. Widhiadnyana IK, Dwi Ratnadi NM. The impact of managerial ownership, institutional ownership, proportion of independent commissioner, and intellectual capital on financial distress. Journal of Economics, Business, & Accountancy Ventura. 2019; 21(3): 351–60. doi: 10.14414/jebav.v21i3.1233

30. Loderer C, Martin K. Executive Stock Ownership and Performance Tracking Faint TRACES. Journal of Financial Economics. 1997; 45: 223–255.

31. Jensen MC, Murphy KJ. Performance Pay and Top-Management Incentives. Journal of Political Economy. 1990; 98(2): 225–264. doi: 10.1086/261677

32. Aggarwal R, Samwick A. The Other Side of the Tradeoff: The Impact of Risk on Executive Compensation. National Bureau of Economic Research; 1998. doi: 10.3386/w6634

33. Elsayed N, Elbardan H. Investigating the associations between executive compensation and firm performance. Journal of Applied Accounting Research. 2018; 19(2): 245–270. doi: 10.1108/jaar-03-2015-0027

34. Shah SZA, Hussain Z. Impact of Ownership Structure on Firm Performance Evidence from Non-Financial Listed Companies at Karachi Stock Exchange. International Research Journal of Finance and Economics. 2012; 84: 6–13.

35. Yermack D. Higher market valuation of companies with a small board of directors. Journal of Financial Economics. 1996; 40(2): 185–211.

36. Jensen MC. Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. American Economic Review. 1986; 76: 323–329.

37. Al-Najjar B, Clark E. Corporate governance and cash holdings in MENA: Evidence from internal and external governance practices. Research in International Business and Finance. 2017; 39: 1–12. doi: 10.1016/j.ribaf.2016.07.030

38. Yıldırım D, Çelik AK. Testing the pecking order theory of capital structure: Evidence from Turkey using panel quantile regression approach. Borsa Istanbul Review. 2021; 21(4): 317–331. doi: 10.1016/j.bir.2020.11.002

39. Basiouny MM, Mohamed E, Tammam AA. The Effect of Institutional Ownership on Corporate Cash Holdings: Evidence from Egypt. Alexandria Journal of Accounting Research. 2023; 7.

40. Brown JR, Martinsson G, Petersen BC. Do financing constraints matter for R&D? European Economic Review. 2012; 56(8): 1512–1529. doi: 10.1016/j.euroecorev.2012.07.007

41. Jebran K, Chen S, Zhang R. Board diversity and stock price crash risk. Research in International Business and Finance. 2020; 51: 101122. doi: 10.1016/j.ribaf.2019.101122

42. Harford J, Mansi SA, Maxwell WF. Corporate governance and firm cash holdings in the US. Journal of Financial Economics. 2008; 87(3): 535–555. doi: 10.1016/j.jfineco.2007.04.002

43. Khalil MS, Nadeem MA, Shahzad S. The Impact of Managerial Ownership on the Cash Holdings in the Cement Sector of Pakistan. Journal of Business & Tourism. 2016; 2: 97–105. doi: 10.34260/jbt.v2i1.32

44. Lee KW, Lee CF. Cash Holdings, Corporate Governance Structure and Firm Valuation. Review of Pacific Basin Financial Markets and Policies. 2009; 12(03): 475–508. doi: 10.1142/s021909150900171x

45. Darma NS, Lukviarman N, Setiany E. The Effect of Corporate Governance on Cash Holdings. Jurnal Dinamika Akuntansi. 2021; 13(2): 158–167. doi: 10.15294/jda.v13i2.32896

46. Fadhillah R, Burhany DI. The Mechanism of Corporate Governance, Financial Performance and Corporate Values in Sharia Companies in Indonesia. In: Proceedings of the International Conference on Creative Economics, Tourism and Information Management. doi: 10.5220/0009857500220034

47. Abdioğlu N. Managerial Ownership and Corporate Cash Holdings: Insights from an Emerging Market. Business and Economics Research Journal. 2016; 7(2): 29–29. doi: 10.20409/berj.2016217494

48. Mehran H. Executive compensation structure, ownership, and firm performance. Journal of Financial Economics. 1995; 38: 163–184.

49. Iona A, Leonida L, Ventouri A. Does executive ownership lead to excess target cash? The case of UK firms. Corporate Governance: The International Journal of Business in Society. 2017; 17(5): 876–895. doi: 10.1108/cg-02-2017-0028

50. Liu Y, Mauer DC. Corporate cash holdings and CEO compensation incentives. Journal of Financial Economics. 2011; 102(1): 183–198. doi: 10.1016/j.jfineco.2011.05.008

51. Gill A, Shah C. Determinants of Corporate Cash Holdings: Evidence from Canada. International Journal of Economics and Finance. 2011; 4(1). doi: 10.5539/ijef.v4n1p70

52. Myers S, Majluf N. Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have. National Bureau of Economic Research; 1984.

53. Ferreira MA, Vilela AS. Why Do Firms Hold Cash? Evidence from EMU Countries. European Financial Management. 2004; 10(2): 295–319. doi: 10.1111/j.1354-7798.2004.00251.x

54. Ozkan A, Ozkan N. Corporate cash holdings: An empirical investigation of UK companies. Journal of Banking & Finance. 2004; 28(9): 2103–2134. doi: 10.1016/j.jbankfin.2003.08.003

55. Ringle CM, Sarstedt M. Gain more insight from your PLS-SEM results. Industrial Management & Data Systems. 2016; 116(9): 1865–1886. doi: 10.1108/imds-10-2015-0449

56. Gujarati DN, Porter DC, Gunasekar S. Basic Econometrics. McGraw-Hill Education (India) Private Limited; 2012.

57. Widarjono A. Econometrics: Theory and Applications for Economics and Business, 2nd ed. Yogyakarta: Econisia FE Universitas Islam Indonesia; 2007.

58. Shah WU, Afridi FK. Impact Of Investment and Financial Risks on Financial Indicators of Investment and Securities Firms in Pakistan. City University Research Journal. 2021; 11(1): 108–123.

59. Kusnadi Y, Wei KCJ. The determinants of corporate cash management policies: Evidence from around the world. Journal of Corporate Finance. 2011; 17(3): 725–740.

This site is licensed under a Creative Commons Attribution 4.0 International License.