Female directors and corporate cash holdings: monitoring vs executive roles

2019 ◽  
Vol 58 (2) ◽  
pp. 295-312 ◽  
Author(s):  
Domenico Rocco Cambrea ◽  
Paolo Tenuta ◽  
Vincenzo Vastola
Keyword(s):  
Fixed Effects ◽  
Gender Diversity ◽  
Cash Holdings ◽  
Listed Companies ◽  
Management Decision ◽  
Content Type ◽  
Female Directors ◽  
Cash Reserves ◽  
The Impact ◽  
Corporate Cash Holdings

Purpose The purpose of this paper is to investigate the impact of gender diversity on corporate cash holdings by scrutinizing different positions covered by female board directors. Design/methodology/approach The paper examines a sample of Italian listed companies between 2006 and 2015. Fixed-effects regressions are employed as the base empirical methodology. In addition, because the link between corporate governance variables and cash may suffer from endogeneity issues, the study employs several tests to control for this potential problem. Findings The empirical findings demonstrate that the relationship between gender diversity and cash holdings depends on the role of female directors on the boards. Specifically, the evidence shows that women in monitoring functions, ruled by independent directors and female chairs, led to a decrease in cash reserves. Conversely, companies managed by female CEOs have larger cash holdings. Research limitations/implications The paper refers to Italian listed companies only and does not analyze whether and how the financial crisis has affected the link between female directors and cash reserves. Practical implications The study provides insights for the diverse effects of female directors on cash management decision and contributes to the debate on gender diversity capabilities for improving firm financial flexibility. Originality/value This paper is the first empirical study to attempt to disentangle the effect of gender diversity on cash holdings. It sheds light on the consequences of appointing female directors on cash policies and explores the Italian context after the introduction of the gender quotas law.

The impact of corporate environmental responsibility on corporate cash holdings: evidence from the most polluting listed companies in China

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jia Liao ◽  
Liping Zheng ◽  
Yu Yuan
Keyword(s):  
Environmental Protection ◽  
Emerging Market ◽  
Cash Holdings ◽  
Listed Companies ◽  
Environmental Responsibility ◽  
Corporate Environmental Responsibility ◽  
Content Type ◽  
Value Of Cash ◽  
The Impact ◽  
Corporate Cash Holdings

PurposeThe purpose of this paper is to examine the impact of corporate environmental responsibility (CER) on corporate cash holdings. This paper also investigates the moderating effects of ownership type and institutional environment between CER and corporate cash holdings.Design/methodology/approachThis study uses the data of the most polluting listed companies on the Shanghai and Shenzhen stock exchange markets over the period 2010–2019. CER data from Hexun.com (a professional CSR evaluation system) are used to measure CER performance. Two proxies are used to measure the level of cash holdings simultaneously, where CASH1 is calculated as the ratio of cash and cash equivalents to total assets, and CASH2 is calculated as the ratio of cash and cash equivalents to net assets (total assets minus cash and cash equivalents). Finally, multiple regression analysis is applied to test the research hypotheses.FindingsThe results show that environmentally responsible companies hold substantially less cash, and the result is statistically significant and robust even after using firm fixed effects and applying alternative measures of cash holdings or alleviating potential endogeneity. In addition, the results of cross-sectional tests show that the negative relation between CER and corporate cash holdings is concentrated among non-state-owned enterprises, and firms in provinces with more developed institutions. Furthermore, the result of the analysis of the economic consequence shows CER significantly increases the value of cash holdings.Research limitations/implicationsThis study focuses on China's institutional context, which limits the generalizability of the findings to other countries. However, the objective of this research can be studied in other institutional settings, so the above limitations provide a springboard for further research. Furthermore, the environmental protection investment, green technology innovation, and even pollutant discharge of companies can also be important indicators to measure the performance of firms in fulfilling their environmental responsibilities, which can be considered in future research.Practical implicationsThe findings of this study may help company management in China to establish a correct view of environmental responsibility to achieve corporate value creation and corporate sustainability. And our research can also provide the policy reference value for the Chinese government to further improve environmental protection policies and systems, guide enterprises to conduct green production to realize the country's vision of an environmentally friendly society.Originality/valueBased on the current background that countries in the world advocate the development of a green economy, this is the first study to examine the impacts of the environmental responsibility of the most polluting companies on corporate cash holdings and the value of cash holdings in the context of China, an emerging market.

Does the gender quota law affect bank performances? Evidence from Italy

2020 ◽  
Vol 20 (6) ◽  
pp. 1135-1158
Author(s):  
Romilda Mazzotta ◽  
Olga Ferraro
Keyword(s):  
Fixed Effects ◽  
Gender Diversity ◽  
Estimation Model ◽  
Board Diversity ◽  
Content Type ◽  
Female Directors ◽  
Negative Effect ◽  
And Gender ◽  
Gender Quota ◽  
The Impact

Purpose This study aims to examine the impact of an increasing board diversity on the performance of Italian listed banks for the period 2008–2014, taking into account the effects of the implementation of gender quota laws in Italy. The study also investigates the effects of this potential relationship during the crisis that Italy had to cope with since 2011, as well as the potential impact of female directors and their roles on bank boards. Design/methodology/approach To verify this relationship, the study uses a panel sample of 22 listed banks and applies fixed effects with the Driscoll-Kraay error. Considering the shareholders’ perspective, bank performance (BP) is measured by return on average equity. The robustness of results is verified through return on average assets, Tobin’s Q (a market measure from investors/stakeholders’ perspective) and an alternate estimation model, i.e. GMM. Findings The findings highlight a positive relationship between the performance accounting measures and gender diversity, a non-neutral impact of the presence of female directors on boards and a significant and negative effect on market measures. Research limitations/implications The results of the study, as far as accounting measures are concerned, support managerial and legislative efforts toward more gender-balanced boards and the appointment of female directors in executive or independent roles. As per market measures, the results suggest that the presence of women on boards should be considered advantageous in terms of value, so that the market can finally appreciate diverse bank boards. Originality/value First, previous studies did not provide exhaustive results to document the proposed relationship and did not examine this relationship during a financial crisis. Second, the role of female directors on boards is also taken into account. Third, the study highlighted that BP is a multi-dimensional construct, with accounting and market metrics being its distinct dimensions.

How does Buddhism affect corporate cash holdings?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yaoqin Li ◽  
Xichan Chen ◽  
Wanli Li ◽  
Xixiong Xu
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Institutional Ownership ◽  
Religious Culture ◽  
Legal Institutions ◽  
Governance System ◽  
Heckman Selection Model ◽  
Content Type ◽  
The Impact ◽  
Corporate Cash Holdings

PurposeThis study explores whether and how Buddhism impacts corporate cash holdings. Buddhist culture affects investors' perception of how cash is deployed and then influences corporate cash holdings. This study first examines the impact of Buddhism on corporate cash holdings and then investigates whether formal governance mechanisms such as legal institutions and institutional ownership influence the relationship between Buddhism and corporate cash holdings.Design/methodology/approachThe authors conduct empirical tests with data on Chinese listed companies between 2006 and 2019. Buddhism is measured with the natural logarithm of the number of Buddhist temples within a radius of a certain distance around a firm's headquarters. The authors adopt the OLS method to regress and take the 2SLS method, Heckman selection model and FEVD approach to address the endogeneity issue.FindingsThe results show a positive relationship between Buddhism and corporate cash holdings. This positive relation is more prominent for firms located in regions with weak legal institutions and for firms with low institutional ownership. Further analysis shows that Buddhism works through the channel of alleviating agency problems and finally improves the value of cash to investors.Research limitations/implicationsThe authors’ findings have important implications. First, this study provides inspiration for incorporating the ethical values of traditional cultures, such as Buddhism, into the corporate governance system. Second, the findings imply that informal institutions can influence corporate financial decisions beyond the effect of formal institutions, suggesting that informal systems should be emphasized when dealing with business affairs in countries where legal institutions are relatively weak. Third, the results suggest the significance of encouraging research on religious culture to explore its active role in corporate governance.Originality/valueThis study illustrates the positive value of religious culture in advancing corporate governance by relating Buddhism to corporate cash holdings based on the explanation of investors' perception. It makes a marginal contribution to the literature that investigates the determinants of cash policies and explores the firm-level consequences of religious culture, adding to the research area of culture and corporate finance.

Lending relationships, credit ratings and bank loan spreads: evidence from Indonesian listed companies

2020 ◽  
Vol 16 (4) ◽  
pp. 455-479
Author(s):  
Yane Chandera ◽  
Lukas Setia-Atmaja
Keyword(s):  
Fixed Effects ◽  
Credit Ratings ◽  
Listed Companies ◽  
Bank Loan ◽  
Least Squares Regression ◽  
Firm Level ◽  
Content Type ◽  
Lending Relationships ◽  
Loan Spreads ◽  
The Impact

PurposeThis study examines the impact of firm-bank relationships on bank loan spreads and the mitigating role of firm credit ratings on that impact.Design/methodology/approachThe study sample consists of Indonesian publicly listed companies for the period 2006 to 2016; bank-loan data was extracted from the Loan Pricing Corporation Dealscan database. For the degree of firm-bank relationships, the data on each loan is manually computed, using five different methods taken from Bharath et al. (2011) and Fields et al. (2012). All of the regression analyses are controlled for the year fixed effects, heteroscedasticity, and firm-level clustering. To address the endogeneity issues, this study uses several methods, including partitioning the sample, running nearest-neighbour and propensity score matching tests, and using instrumental variables in two-staged least-squares regression models.FindingsIn line with relationship theory and in opposition to the hold-up argument, this study finds that lending relationships reduce bank loan spreads and that the impact is more noticeable among non-rated Indonesian firms. Specifically, each additional unit in the total number of years of a firm-bank relationship and the number of previous loan contracts with the same bank are associated with 7.34 and 9.15 basis-point decreases, respectively, in these loan spreads.Practical implicationsCorporations and banks should maintain close, long-term relationships to reduce the screening and monitoring costs of borrowing. Regulators should create public policies that encourage banks to put more emphasis on relationships in their lending practices, especially in relation to crisis-prone companies.Originality/valueTo the best of the authors’ knowledge, this is the first study to examine the impact of lending relationships on bank loan spreads in Indonesia. The study offers insights on banking relationships in emerging markets with concentrated banking industries, underdeveloped capital markets and prominent business-group affiliations.

scholarly journals Does gender diversity on the board reduce agency cost? Evidence from Pakistan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ali Amin ◽  
Ramiz Ur Rehman ◽  
Rizwan Ali ◽  
Collins G. Ntim
Keyword(s):  
Gender Diversity ◽  
Business Environment ◽  
Agency Cost ◽  
Agency Conflicts ◽  
Content Type ◽  
Listed Firms ◽  
Financial Firms ◽  
Female Directors ◽  
Board Gender Diversity ◽  
The Impact

Purpose This study aims to examine the effects of board gender diversity on agency costs in non-financial firms listed on the Pakistan Stock Exchange (PSX). Design/methodology/approach Multiple regression analysis is used to determine the impact of board gender diversity on agency cost. The research used panel data consisting of 2,062 firm-year observations of 226 non-financial firms listed on the PSX from 2008 to 2019 to test the proposed hypothesis. In addition, the Blau and the Shannon indices were used to checking for robustness. Findings The results indicate that female presence on the board significantly reduces the agency cost and, hence, mitigates the principal-agent conflict. Moreover, consistent with the critical mass theory, it was found that boards with three or more female directors have a stronger impact on reducing the agency cost, as compared to two or fewer female directors on the board. Research limitations/implications The sample was restricted to non-financial firms listed on the PSX only; therefore, the results reflect the attributes of Pakistan’s business environment. A similar analysis in the context of other countries may generate different results. Practical implications The findings imply that female directors play an important role in reducing agency conflicts between shareholders and managers by enhancing monitoring through effective governance mechanisms. The policymakers, therefore, should focus on female career development and encourage professional training programmes to generate a fair, competitive environment for senior female management. Originality/value This study attempts to fill the literature gap in that no similar study covers the non-financial firms’ listed firms in Pakistan. The paper supports the reforms made by the code of corporate governance by making the placement of female directors mandatory on Pakistani corporate boards. Overall, support is provided for the view that regulators should favour gender quotas regarding the composition of the board management team of listed firms to reduce agency conflicts and gain shareholder confidence.

Do macroeconomic conditions affect corporate cash holdings and cash adjustment dynamics? Evidence from GCC countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Ahdi Noomen Ajmi
Keyword(s):  
Financial Constraints ◽  
Cash Holdings ◽  
Economic Conditions ◽  
External Financing ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Macroeconomic Conditions ◽  
Gcc Countries ◽  
Cash Reserves ◽  
Corporate Cash Holdings

PurposeThis study aims to investigate the influence of macroeconomic conditions on corporate cash holdings in terms of their influence on the level of cash and the speed of adjustment of cash to target levels in the Gulf Cooperation Council countries (GCC).Design/methodology/approachThe study employs both static and dynamic regression analyses considering a sample of 2,878 firm-year observations drawn from stock markets in GCC countries over the 2010–2018 period.FindingsConsistent with the precautionary motive, the results show that GCC firms tend to accumulate cash reserves in weak economic periods. Evidence also reveals that the estimated adjustment coefficients from dynamic panel models show that GCC firms adjust more slowly toward their target cash ratio in periods of unfavorable economic conditions.Practical implicationsThis study has important implications for managers, policymakers and regulators. For managers, the study is an important reference to understand and design cash management policies by considering financial constraints imposed by macroeconomic conditions. In particular, managers should pay more attention to periods of credit crunch and weak economic conditions in which firms may be exposed to greater bankruptcy risks. For policymakers and regulators, this study may be useful in assessing the effect of macroeconomic factors on firm's cash holding decision. Therefore, in an effort to increase the supply of external financing available to firms, policymakers may devise investment friendly environment by controlling macroeconomic factors.Originality/valueThis paper offers some insights on the macro determinants of cash holdings by investigating emerging economies. It explores the role of macroeconomic conditions on corporate cash holdings in terms of their influence on the costs of external funds and financial constraints.

Female directors and risk-taking behavior of Indian firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shreya Biswas
Keyword(s):  
Risk Taking ◽  
Fixed Effects ◽  
Critical Mass ◽  
Gender Diversity ◽  
Dynamic Panel Data ◽  
Fixed Effects Model ◽  
Firm Level ◽  
Content Type ◽  
Female Directors ◽  
Risk Taking Behavior

PurposeThis study examines whether female directorship on board is related to firm's risk-taking behavior in India.Design/methodology/approachThe study considers the top 500 listed companies in India during the period 2013 to 2018 for the analysis. The paper employs fixed effects as well as a dynamic panel data model to address the bias in the fixed effects model when the lagged risk outcome is included as an explanatory variable.FindingsThe study finds that the presence of female directors on board is unrelated to the firm's risk-outcomes and the risk-adjusted return earned by the shareholders. The results are in line with the tokenism theory of board diversity. Having a higher share of female independent directors is also unrelated to the risk-taking behavior of firms. The findings are in contrast to the critical mass theory and the agency theory of gender diversity. The study does not rule out the possibility of female directors' risk-preferences being similar to those of male directors.Practical implicationsThe findings suggest that regulations related to having independent female directors may not add value for the shareholders in the short run. The business case for such stringent regulations in India on the gender diversity of boards remains unclear.Originality/valueThis is the first study to analyze the relationship between gender diversity of boards and firm-level risk in India. Most of the studies have focused on gender diversity and firm performance in India. However, modern portfolio theory suggests that both risk and return are important as shareholders care about risk-adjusted returns.

Family control, agency conflicts, corporate cash holdings and firm value

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ruchi Moolchandani ◽  
Sujata Kar
Keyword(s):  
Firm Value ◽  
Family Firms ◽  
Cash Holdings ◽  
Minority Shareholders ◽  
Content Type ◽  
Family Control ◽  
Indian Family ◽  
Agency Conflict ◽  
Cash Reserves ◽  
Corporate Cash Holdings

PurposeThis paper examines whether family control exerts any influence on corporate cash holdings in Indian listed firms. It also examines how this accumulated cash of family firms impacts firm value.Design/methodology/approachThe study uses dynamic panel data regression estimated using two-step system generalized method of moments (GMM) on S&P BSE 500 firms during 2009–2018 for testing the repercussions of family control on the cash levels of a firm. Further, fixed effects regression has been employed for the valuation analysis.FindingsEstimation results showed that family control negatively impacts cash holdings in Indian firms. Further, the cash accumulation by family firms adversely affects the market valuation of the firm. These findings signal a principal–principal (P-P) agency conflict in Indian family firms, i.e. friction between family owners and minority shareholders' interests. Minority shareholders fear that a part of the cash reserves will be used by family members for personal benefits. Thus, they discount cash reserves in family firms.Originality/valueThe study adds to the determinants of corporate cash holdings in emerging markets. To the best of the authors’ knowledge, this is the first study from India investigating family control as a determinant of cash policy. It sheds light on the P-P agency conflict in Indian family firms. P-P agency conflict is less researched in cash holdings literature as opposed to the principal–agent managerial disputes. Also, the study uses a more comprehensive definition of family control rather than just considering the ownership as used in prior cash holding research.

Managerial optimism and corporate cash holdings

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ly Thi Hai Tran ◽  
Thoa Thi Kim Tu ◽  
Thao Thi Phuong Hoang
Keyword(s):  
Fixed Effects ◽  
Generalized Method Of Moments ◽  
Cash Holdings ◽  
Annual Reports ◽  
Cash Holding ◽  
Growth Opportunities ◽  
Content Type ◽  
Managerial Optimism ◽  
Linguistic Tone ◽  
Corporate Cash Holdings

PurposeThis paper examines the effects of managerial optimism on corporate cash holdings.Design/methodology/approachThe authors construct a novel measure of managerial optimism based on the linguistic tone of annual reports by applying a Naïve Bayesian Machine Learning algorithm to non-numeric parts of Vietnamese listed firms' reports from 2010 to 2016. The paper employs firm and year fixed effects model and also uses the generalized method of moments estimation as robustness checks.FindingsThe authors find that the cash holding of firms managed by optimistic managers is higher than the cash holdings of firms managed by non-optimistic managers. Managerial optimism also influences corporate cash holdings through internal cash flows and the current year’s capital expenditures. Although the authors find no evidence that optimistic managers hold more cash to finance future growth opportunities in general, optimistic managers hold more cash for near future investment opportunities than non-optimistic managers do.Research limitations/implicationsThe novel measure proposed in this study is expected to provide great potential for future finance studies investigating the relation between managerial traits and corporate policies since it is applicable for any levels of financial market development. In addition, the findings highlight the important role, both direct and indirect, of managerial optimism on cash holdings. Related future research should take this psychological trait into account to gain a better understanding of corporate cash holding.Originality/valueThis paper helps to extend the literature on managerial optimism measurement by introducing a new measure of managerial optimism based on the linguistic tone of annual reports. Furthermore, this is among the first studies directly linking annual report linguistic tone to cash holding. The paper also provides new evidence regarding how managerial optimism affects the relationship between the firm's growth opportunities and cash holding, given that mispricing corrections are naturally uncertain.

Women on boards in India: a need or tokenism?

2018 ◽  
Vol 56 (8) ◽  
pp. 1769-1786 ◽  
Author(s):  
Varnita Srivastava ◽  
Niladri Das ◽  
Jamini Kanta Pattanayak
Keyword(s):  
Gender Diversity ◽  
Positive Association ◽  
Regulatory Reform ◽  
Corporate Boards ◽  
Content Type ◽  
Level Of Involvement ◽  
Female Directors ◽  
Women On Boards ◽  
The Right ◽  
The Impact

Purpose The purpose of this paper is to examine the significance of gender diversity on corporate boards in India in the light of recent regulatory reform introduced in the Companies’ Act, 2013 which mandated the presence of at least one woman on the corporate boards of all the listed firms. Design/methodology/approach Based on a panel of 300 firm-year observations for 15 years from 2001 to 2015, regression analysis has been conducted to analyze the relation between gender-related variables of corporate boards with firm-specific financial characteristic, cost of equity (COE) and return on assets (ROA) of firms listed in CNX Nifty, a major financial market index of India. Findings The analysis indicates that boards with gender diversity explain a slightly more than 5.5 percent change in a firm’s COE and have a much higher impact of 45 percent on a firm’s ROA. The presence of female directors on the boards and their independence have a negative association with the COE, whereas the level of involvement of female directors on different committees has a positive association with the ROA. Practical implications The findings may help theorists in defining the right mix of female on the corporate boards in an emerging economy. Also, by taking input from the findings, regulators and industry can formulate policies to foster gender diversity on corporate boards in India. Originality/value This study considers the recent regulatory norm introduced in India. This issue has still not been discussed and analyzed by researchers in India. It attempts to explain the impact a gender diverse board can make on a firm’s performance. It also makes valuable recommendations to improve the norms intended to more effectively foster gender diversity on corporate boards in India.

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