Women on boards and on top management positions and excess cash holdings: a quantile regression approach

Abstract

Purpose This paper aims to examine the impact of gender diversity on boards and on top management positions on excess cash holdings. Design/methodology/approach The authors adopt the quantile regression approach to test the relation between gender diversity and excess cash holding. The sample consists of 1,235 firm-year observations for the period 2005–2017. Findings The authors find that board gender diversity negatively influences the level of excess cash. This result suggests that women appointed in the boardroom are effective in monitoring managerial actions, including financing policies. The results also show that by forcing companies to have a quota of women on their boards, the presence of women no longer has a negative impact on excess cash holdings. However, when women stand at the chief executive officer or chief financial officer position, they tend to accumulate cash for precautionary motives. These results suggest that women behave differently regarding excess cash holding as monitors compared to their role as decision-makers. Practical implications The results may be of interest to legislators who may decide to break the glass ceiling, preventing women from gaining greater access to senior management positions. This is in line with the recommendations of the AFEP-MEDEF Governance Code of 2020, which strongly recommends the recruitment of women to senior management positions. The results are also important to investors, who might be likely to trust companies in which women hold positions on boards of directors which may increase firm value. The results may also have a social impact. Indeed, the role of women in society may be enhanced if such initiatives are taken to increase their representation on leadership positions and in society in general. Social implications The results may also have a social impact. Indeed, the role of women in society may be enhanced if such initiatives are taken to increase their representation on leadership positions and in society in general. Originality/value This study investigates the role of women both as controllers and decision-makers in holding excessive amounts of cash. It also highlights new evidence on the impact the approach of appointing women on boards (enabling/coercive and market-based) can have on the relation between gender diversity and excess cash holdings.