Abstract:
The study examines the impact of women directors on bank cash holdings for a sample of
187 listed commercial banks from 14 countries namely Bangladesh, India, China,
Pakistan, Malaysia, Saudi Arabia, Sri Lanka, Thailand, Turkey, UAE, Jordan,
Philippines, Oman and Indonesia. The study uses both fixed and random effect
specifications and documents a negative association between women directors and cash
holdings. The results indicate women directors support agency motive, instead of
precautionary. Further, it examines the role of critical mass of women directors and
documents that presence of three or more results in lower level of cash reserves.
Moreover, it investigates the role of educational women experts (highly educated women
directors and business women directors) and women financial experts in shaping cash
policy. From these shades, results show business women directors increase cash holdings
level supporting precautionary savings hypothesis instead of agency.
The impact of women directors on bank cash holdings is examined using two-step system
GMM approach in order to address endogeneity issue. Regression results are same as
reported under fixed effect and random effect specifications i.e. a negative and significant
relation. Regarding highly educated women directors, GMM estimations show that such
women lower cash levels. Business women directors are significantly and negatively
related to cash to total asset ratio. Interestingly, the women financial experts are found to
increase the level of excess reserves, supporting the argument that such women directors
on board think that holding excess reserves provide cushion against potential risks and
uncertainties, thus are supporting precautionary motive.
