Cash is queen? Impact of gender-diverse boards on firms' cash holdings during COVID-19

Abstract

This study examines the role of gender-diverse boards in preserving cash holdings during crises. Using a sample of UK firms during the COVID-19 period, we find that firms with more female directors had higher cash holdings. This increase in cash reserves is primarily driven by reduced board compensation, reflecting the careful stewardship associated with gender-diverse boards. Interestingly, we find no evidence of female directors reducing acquisition activity or capital expenditures, suggesting that these firms did not compromise on growth prospects while building their cash buffer. Our study underscores the value of gender-diverse boards in navigating firms through crises without sacrificing shareholder value. Our results remain robust even after controlling for endogeneity and alternative estimation techniques. The findings hold significant implications for investors, policymakers, and advocates of gender diversity in boardrooms, emphasizing the financial prudence that gender diversity can bring in crisis management.