title: The Impact of Board Gender Diversity on Cash Holdings, Stock Liquidity, and Green Financing in International Markets
Creators: name: Samarakoon Arachchige, Ruwan L
Publisher: name: Griffith University
Year: 2024
Subjects: subject: board gender diversity
subject: cash holdings
subject: stock liquidity
subject: green finance

description: This thesis examines the impact of board gender diversity as a governance mechanism on different corporate outcomes: cash holdings, stock liquidity, and green financing, and on the interlink between stock liquidity and cash holdings, using four unique studies. Several factors motivate an investigation of board gender diversity effects, using a worldwide sample: i) global call to improve board gender diversity with quotas and voluntary initiatives; ii) rising global uncertainties such as the COVID-19 pandemic that require resilient boards; iii) variations in the institutional environment across international economies; iv) the paucity of existing literature in explaining the effects of board gender diversity from a global and holistic perspective. The first study examines the relationship between board gender diversity and cash holdings, with an emphasis on the board's behaviour during uncertain times. Drawing from 94,950 firm-year observations across 49 countries from 2006 to 2021, the study finds that board gender diversity significantly reduces firms' cash holdings and excess cash worldwide. Firms increasingly face disruptive surprises such as the COVID-19 pandemic; hence, it is important to examine whether gender-diverse boards are resilient in reducing agency problems associated with cash holdings when confronted with higher levels of uncertainty. This study provides fresh insights into the resilient attributes of gender-diverse boards in addressing these agency problems. Further, the study discerns the effects of the institutional environment, economic development, and national culture on the efficacy of gender-diverse boards. Findings are robust to endogeneity concerns, regulatory effects, and sample bias. This study contributes to the cash holdings and firm's resilience literature with insights into board gender diversity effects and cross-country variability and gender-quota effects. The rise of unprecedented uncertainties on a global scale demands more resilient firms to protect the interests of stakeholders. Hence, the second study investigates whether gender-diverse firms are resilient in maintaining stock liquidity during uncertain times, using a worldwide sample of 49 countries with 95,730 firm-year observations. Results show that gender-diverse boards improve stock liquidity, benefiting the stockholders. Of note during the pandemic, stock liquidity decreased for firms with less gender-diverse boards, but increased for firms with greater gender diversity. The study further provides evidence for the positive effects of mandatory gender quotas on stock liquidity, and the effects of institutional environment and national culture on gender diversity-stock liquidity association. This study contributes to the stock liquidity literature with board gender diversity effects during uncertain times, effects of gender-quotas and factors affecting cross-country variability. Financing for climate change initiatives is on the rise. The third study investigates whether board diversity drives green financing using cross-country data. Findings show that diverse boards in terms of gender and generalist skills improve the level of green financing. Moreover, the study examines two mechanisms that explain the positive association between board diversity and green financing. The findings show that diverse boards increase ESG ratings and reduce default risk, leading to higher levels of green financing. Further, the study provides evidence for the heterogeneity of the board diversity-green financing association with a sustainability-linked compensation policy and attributes of national culture. The study contributes to the literature in several ways. Despite prior literature showing board diversity effects on environmental performance, there is a dearth of studies on how board diversity influences the firm's level of green financing. This study fills this gap using cross-county data. Moreover, this study adds to the literature by providing mechanisms and interaction effects on the positive association between board diversity and green financing. Building on the observations of the first and second studies, the fourth study further examines the interlinks between stock liquidity and cash holdings. The purpose of this study is to investigate whether investors practise disciplinary trading using the ESG scores provided by rating agencies to influence firms' cash holdings. Employing a larger sample of US listed firms, this study finds that stock liquidity acts as a channel between ESG scores and cash holdings. ESG scores carry vital information on the effectiveness of firms' governance and on agency problems. Hence, investors respond to ESG information through stock trading that sends signals to management, resulting in changes in firms' cash holdings. Consequently, investors use stock trading as a mechanism to create the necessary push for insiders to resolve agency problems. The study contributes to the cash holdings and stock liquidity literature with novel evidence on how investors' disciplinary-based trading could influence a firm's behaviour. Overall, this thesis provides evidence of the positive effects of board diversity on different firm outcomes and the ability of stockholders to influence a firm's policies through stock trading to achieve desirable outcomes.