Beyond Gender Diversity: Two Shades of Women Directors and Bank Cash Holdings

Abstract

Drawing upon the precautionary savings theory and agency theory, the researchers present two competing hypotheses to examine the influence of women directors, critical mass, and the attributes of women directors (specifically, educational expertise in terms of level and type, and financial expertise) on decisions related to bank cash holdings. Utilizing a dataset comprising 1375 observations representing 187 Asian commercial banks spanning from 2011 to 2019, it is discovered that women directors (as well as a critical mass of women directors) exhibit a negative correlation with bank cash holdings, supporting the agency problem-based explanation. These findings remain robust across alternative econometric specifications and varied measures of cash holdings. Concerning the impact of educational expertise, results from the Generalized Method of Moments (GMM) analysis indicate that women directors with a high level of education reduce the level of cash holdings, and those with qualifications in business/accounting/finance also decrease the level of cash holdings when measured by CASH1. Notably, the results reveal that women directors with a financial background increase excess cash holdings, aligning with the precautionary savings-based explanation. The findings contribute valuable insights to the ongoing global discourse on gender diversity and its ramifications for the banking sector.