Board gender diversity and corporate cash holdings: evidence from Australia

Abstract

Purpose This study aims to understand the dynamics of Australian boards by focusing on the influence of board gender diversity on firms' cash holdings, within the distinctive Australian “if not, why not” regulatory framework. Design/methodology/approach The study uses ordinary least squares (OLS), fixed effects, generalized method of moments (GMM) and quasi-experimental methods such as difference-in-differences and propensity score matching to analyze the data. Findings There is a significantly negative relationship between board gender diversity and corporate cash holdings. This relationship is more pronounced when two or more female directors are on the board, supporting the critical mass theory. The results also reveal that the observed pattern can be attributed to the heightened monitoring intensity of female independent directors. Our quasi-experimental methods and pre-post analysis reveal that the observed effects are genuinely attributable to the increase in board gender diversity following regulatory reforms in Australia. Practical implications The findings provide practical insights for companies and policymakers, emphasizing the tangible effects of gender diversity on a company's financial strategy and corporate cash holdings. This information is crucial for organizations aiming to make informed decisions regarding board compositions and governance structures. Originality/value This research offers fresh insights into an important relationship between gender diversity on boards and corporate financial strategies in the Australian context, enriching the global conversation on the significance of gender diversity in corporate leadership.