How female directors help firms to attain optimal cash holdings

66 Pages Posted: 6 May 2019 Last revised: 22 Jan 2022

See all articles by Onur Kemal Tosun

Onur Kemal Tosun

Cardiff Business School - Accounting and Finance Section

Izidin El Kalak

Cardiff Business School

Robert Hudson

Hull University Business School (HUBS)

Date Written: January 20, 2022

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.

Keywords: Female directors; excess cash; CEO overconfidence; effective monitoring; board diversity.

JEL Classification: G30, G32, G38

Suggested Citation

Tosun, Onur Kemal and El Kalak, Izidin and Hudson, Robert, How female directors help firms to attain optimal cash holdings (January 20, 2022). International Review of Financial Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3366827 or http://dx.doi.org/10.2139/ssrn.3366827

Onur Kemal Tosun

Cardiff Business School - Accounting and Finance Section ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

Izidin El Kalak

Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

Robert Hudson (Contact Author)

Hull University Business School (HUBS) ( email )

Hull, HU6 7RX
United Kingdom

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