Capitalizing on Diversity: The Impact of Board Gender Diversity on the Value of Excess Cash

Abstract

This paper provides novel and comprehensive evidence regarding the impact of board gender diversity on the valuation of excess cash in companies. By analyzing a robust dataset of publicly listed firms in France from 2005 to 2017, the study finds that companies with a higher representation of women on their boards tend to significantly increase the value attributed to their excess cash reserves. The results suggest that investors perceive these companies as more capable of managing their cash efficiently, leading to a higher valuation. This perception likely stems from the belief that diverse boards contribute to better decision-making processes, which in turn enhances the effectiveness of cash utilization. Furthermore, the study uncovers that the positive relationship between board gender diversity and the valuation of excess cash is even more pronounced in firms that demonstrate high earnings quality. This finding underscores the importance of a transparent and reliable informational environment in strengthening the link between gender diversity and the efficient use of corporate resources. The research contributes to the broader corporate governance literature by emphasizing the critical role of board gender diversity in not only promoting effective cash management but also in increasing overall firm value through improved investor confidence and resource allocation strategies.