Board diversity and the marginal value of corporate cash holdings

Abstract

Using the Blau index, this study measures board diversity and uses data on A-share companies listed in Shanghai and Shenzhen between 2011 and 2020 to investigate how board diversity affects the marginal value of corporate cash holdings. We find that greater board diversity indicates a greater marginal value of corporate cash holdings. Board independence, property rights, and environmental dynamism moderate the relationship between board diversity and the marginal value of corporate cash holdings. Further mechanism analysis shows that high-diversity boards improve the marginal value of corporate cash holdings by alleviating agency problems and increasing firms' resources. This study provides new ideas and evidence for discussing how macro- and micro-factors affect corporate governance. Furthermore, the results provide a reference for accounting information users to analyze corporate value and make reasonable investment decisions.