Empowerment or ornament? Gender diversity’s impact on cash holdings amid quota enforcement in an emerging market

• Date: 10 December 2024
• Pages: 187-212
• DOI: https://doi.org/10.1108/IJAIM-06-2024-0198
• Published date: 10 December 2024
• Author: Mohamed M. El-Dyasty,Ahmed Elamer

Empowerment or ornament? Gender

diversity’s impact on cash holdings

amid quota enforcement in an

emerging market

Mohamed M. El-Dyasty

Department of Accounting, Faculty of Commerce, Mansoura University,

Mansoura, Egypt, and

Ahmed Elamer

Brunel Business School, Brunel University London, London, UK;

Gulf Financial Center, Gulf University for Science and Technology, Mishref,

Kuwait; UNEC Accounting and Finance Research Center,Azerbaijan State

University of Economics, Baku, Azerbaijan and Department of Accounting,

Faculty of Commerce, Mansoura University, Mansoura, Egypt

Abstract

Purpose –This study examines the impact of female directors on cash holdings in Egyptian listed f‌irms,

particularly in light of Decree 123/2019, which mandates female board representation. This study aims to

determine if female directors mitigateagency conf‌licts related to cash holdings and how these dynamics shift

post-quotaimplementation.

Design/methodology/approach –Using a panel f‌ixed-effectsmodel, the research analyzes 1,563 f‌irm-year

observationsfrom 223 non-f‌inancial Egyptian f‌irms listed on theEGX between 2014 and 2022. The robustness

of the f‌indings is tested through additional analyses using alternative proxies for cash holdings, different

sample periodsand a two-stage least squares approach toaddress endogeneity concerns.

Findings –This study f‌inds a signif‌icantnegative association between female directors and cash holdings, suggesting

that female board members may promote more conservative cash management practices. However, this relationship

weakens post-quota implementation, becoming statistically insignif‌icant. This impliesthat while quotas increase female

representation, they do not necessarily enhance corporate governance effectiveness regarding cash management. The

pre-quota positive link between female directors and excess cash holdings also becomes insignif‌icantpost-quota.

Research limitations/implications –The study focuses on female directors’impact on cash holdings,

excluding potential effectson other board subcommittees or functions. It does not capture long-termbenef‌its

of increased female representation,which may emerge as the pool of qualif‌ied female directors grows. Future

research should explore broader implications of gender diversity guidelines and other diversity dimensions

across variouscorporate governance aspects and institutional contexts.

Originality/value –This research provides empirical evidence from an emerging market context on the

understudied impact of genderdiversity on cash holdings. It critically evaluates the unintendedconsequences

Funding: The authors received no f‌inancial support for the research, authorship and/or publication of

this article.

Data availability statement: Data available on request from the authors.

Conf‌lict of interest disclosure: The authors declared no potential conf‌licts of interest.

Ethics approval statement: This article does not contain any studies with human participants or

animals performed by any of the authors.

International

Journal of

Accounting &

Information

Management

187

Received20 June 2024

Revised16 September 2024

Accepted21 N ovember 2024

InternationalJournal of

Accounting& Information

Management

Vol.33 No. 1, 2025

pp. 187-212

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-06-2024-0198

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1834-7649.htm

of mandatory gender quotas,highlighting the complexity of regulatory interventionsin corporate governance.

The study stressesthe need for policymakers to address factors limitingthe effectiveness of such quotas and to

consider potentialsuboptimal outcomes when increasing female board representationwithout a corresponding

increasein the supply of qualif‌iedfemale directors.

Keywords Female directors, Quota, Cash holdings, Corporate governance, Emerging markets

Paper type Research paper

1. Introduction

The conceptual frameworks of both the Financial Accounting Standards Board (FASB) and

the International Financial Reporting Standards (IFRS) emphasize that assets are def‌ined as

present resources of an entitythat can provide future economic benef‌its (Elamer and Utham,

2024;Khatib et al., 2021;Marie et al., 2024). Cash is a prime example of such a resource,

given its liquidity and the role it plays in a f‌irm’s operations. It can be readily converted into

other assets or used toachieve strategic objectives, such as funding operationsor investments

that promote growth. Cash holdings represent a crucial strategic resource for f‌irms,

inf‌luencing both operational f‌lexibility and future growth potential. However, recent global

trends indicate a signif‌icant increase in f‌irms’cash hoarding (Amess et al., 2015;Banjade

and Diltz, 2022;Khatib et al., 2021;Jilani et al., 2023). This trend raises concerns about

potential agency conf‌licts, where managers might prioritize personal gain over optimal

allocation of these excess cash reserves (Boubaker et al., 2015;Kim et al., 2015;Jensen,

1986). Consequently, effective corporate governance mechanisms are essential to mitigate

such conf‌licts and ensure thatcash holdings are managed in the best interests of shareholders.

In navigating these complexities, the composition of corporate boards, particularly the

inclusion of female directors, has drawn scholarly attention (Elamer and Utham, 2024;

Abdelkader et al., 2024;Ahmedet al., 2022;Boubaker et al.,2015;Chen and Hassan, 2022;

Cimini, 2022). Emerging literature posits that female directors, with their distinct ethical

sensitivity, risk aversion and commitment to shareholder interests, could be instrumental in

enhancing corporategovernance and decision-making processes related to cashmanagement

(Datta et al., 2023;El-Dyasty and Elamer, 2021;Feng et al., 2020;McLaughlin et al., 2021;

Shohaieb et al., 2022;Wan Ismail et al.,2022). Despite these insights, the empirical

investigation of gender diversity’s impact, especially within the ambit of enforced gender

quotas in emerging markets,remains scant. Such contexts offer a fertile groundfor exploring

the nuanced dynamics of corporate governance,given their distinct regulatory environments

and the recent shifts toward enhancedboard diversity. This is particularly truein the context

of emerging marketslike Egypt, where research on cash holdings is limited.

Egypt offers a unique case study due to recent regulatory changes by the Financial

Regulatory Authority (FRA). The introduction of Decree 123/2019 and its subsequent

amendments underpin a national strategy aimed at bolstering female representation within

the echelons of corporate boards. This legislativethrust toward gender quotas, aligning with

broader societal objectives encapsulated in Egypt’s Vision 2030 and the National Strategy

for Empowerment of Egyptian Women 2030. Decree 109/2021 further strengthened this

policy, raising the quota to 25% or at least two female directors. These mandates offer a

timely opportunityto examine the consequences of gender quotas in corporategovernance.

Extant literature suggests female directors possess characteristics that could inf‌luence

cash holdings, including heightenedethical sensitivity and risk aversion (Datta et al., 2023),

stronger alignment with shareholderinterests (Datta et al., 2021;WanIsmail et al., 2022)and

a tendency to reduce corporate debt and acquisitions (Xu et al.,2019). Additionally, they

may have more power to avoid lawsuits (Adhikari et al., 2019) and strengthen corporate

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