Female Directors, CEO Overconfidence and Excess Cash

64 Pages Posted: 6 May 2019

See all articles by Izidin El Kalak

Izidin El Kalak

Cardiff Business School

Onur Kemal Tosun

Cardiff Business School - Accounting and Finance Section

Date Written: April 5, 2019

Abstract

Is the moderating effect of female board representation on the CEO overconfidence sufficiently strong to alter the firms’ excess cash decisions? We address this question using data on 1,163 US-listed firms for 2000-2017. Prior research posits that overly confident CEOs hold less cash compared to their rational counterparts. We show that having more female directors on the board not only stops the decline in excess cash due to the overconfident CEO but also increases excess cash holdings in those firms. Better female board representation enhances corporate decision making through effective monitoring and thus, taming the CEO’s biased behavior i.e., overconfidence.

Keywords: female directors, excess cash, CEO overconfidence, effective monitoring, board diversity

JEL Classification: G30, G32, G38

Suggested Citation

El Kalak, Izidin and Tosun, Onur Kemal, Female Directors, CEO Overconfidence and Excess Cash (April 5, 2019). Available at SSRN: https://ssrn.com/abstract=3366827 or http://dx.doi.org/10.2139/ssrn.3366827

Izidin El Kalak (Contact Author)

Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

Onur Kemal Tosun

Cardiff Business School - Accounting and Finance Section ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

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