How female directors help firms to attain optimal cash holdings

El Kalak, Izidin; Tosun, Onur; Hudson, Robert

Abstract

Is female board representation helpful for firms attaining optimal cash holdings? We address this question using data on 1,163 US-listed firms for 2000-2017. We show that if there are more female directors on firm boards, ceteris paribus, there is no effect on excess cash holdings implying that female directors are not inclined to be particularly cautious or optimistic. However, in the presence of overly confident CEOs, having more female directors on the board counteracts the tendency of such CEOs to reduce cash holding below an optimal level. Thus, female board representation enhances corporate decision making through effective monitoring and thus, taming CEOs’ biased behavior.

Citation

El Kalak, I., Tosun, O., & Hudson, R. (in press). How female directors help firms to attain optimal cash holdings. International review of financial analysis, Article 102034. https://doi.org/10.1016/j.irfa.2022.102034

• Journal Article Type: Article
• Acceptance Date: Jan 9, 2022
• Online Publication Date: Jan 24, 2022
• Deposit Date: Jan 13, 2022
• Publicly Available Date: Jul 25, 2023
• Journal: International review of financial analysis
• Print ISSN: 1057-5219
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Article Number: 102034
• DOI: https://doi.org/10.1016/j.irfa.2022.102034
• Keywords: Female directors; Excess cash; CEO overconfidence; Effective monitoring; Board diversity
• Public URL: https://hull-repository.worktribe.com/output/3910958