The nexus between female directors and corporate cash holdings: Evidence from Indonesia

Abstract

In the last decade, gender diversity on boards or women in the boardroom has gained the attention of academics and practitioners. This paper aims to explore how women directors affect corporate cash holdings in Indonesia. This study utilizes data on Kompas 100 index firms for 2014–2021. A fixed-effect estimator is used to analyze data. The study reveals that female directors positively influence cash holdings. This finding remains robust when employing an alternative proxy for female directors and excluding observations during the COVID-19 period. Additionally, the findings indicate notable variations in cash holdings between companies with and without female directors. Regarding control variables, a firm’s cash holdings are negatively influenced by board size, leverage, company size, and net working capital. Firm profitability and growth opportunities positively influence cash holdings. This paper also documents that institutional ownership weakens the nexus between female directors and cash holding. The findings highlight that female directors hold higher amounts of cash because of their increased risk aversion. This study enriches the discussion on female directors and cash-holding levels in a developing country with a two-tiered board system. AcknowledgmentsThis study is not funded by any funding agency.

Keywords

• agency theory
• cash holdings
• corporate governance
• female directors
• institutional ownership