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Female CFOs and corporate cash holdings: Precautionary motive or agency motive?

Xixiong Xu, Wanli Li, Yaoqin Li and Xing Liu

International Review of Economics & Finance, 2019, vol. 63, issue C, 434-454

Abstract: This paper investigates the impact of CFO gender on corporate cash holdings and its underlying mechanism. Based on both precautionary savings theory and agency theory, we propose two competing hypotheses to investigate the association between CFO gender and corporate cash holdings. Using a sample of Chinese listed firms during the period from 2007 to 2015, we find that firms with female CFOs hold substantially more cash, which favors the precautionary savings-based explanation. Further analyses indicate that this effect is more pronounced in financially constrained firms and non-SOEs. We also find that female CFO-led firms are more likely to hold excess cash, hence damaging the value of cash holdings. Furthermore, we document that the enhancement of the female CFOs’ abilities helps to alleviate the impact of gender differences on cash holdings. Overall, our study highlights the critical role played by CFO gender in shaping corporate cash policy.

Keywords: Cash holdings; CFO gender; Precautionary motive; Agency motive; CFO ability (search for similar items in EconPapers)
JEL-codes: G30 G32 J16 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.iref.2019.05.006

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