The Effect of Governance Mechanisms on Small and Medium-Sized Enterprise Cash Holdings: Evidence from the United Kingdom

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18 Citations (Scopus)


This paper investigates the impact of governance mechanisms on small and medium-sized enterprise (SME) cash holdings from 2000 to 2009, employing static and dynamic panel data analyses. We find no evidence that firm governance index and insider ownership affect cash holdings. This might indicate that governance mechanisms in SMEs are relatively weak. We also report that chief executive officer compensation has a positive effect on cash holdings. Firm-specific factors such as firm size, leverage, and liquidity negatively affect cash holdings, whereas the research and development ratio and operating risk are positively associated with them. Finally, SMEs have target cash holdings and adjust to these.
Original languageEnglish
Pages (from-to)303-320
Number of pages18
JournalJournal of Small Business Management
Issue number2
Early online date8 Jan 2014
Publication statusPublished - Apr 2015
Externally publishedYes


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