Board gender diversity and corporate cash hoarding in Europe: The moderating role of investor protection laws

Type of the article: Research Article AbstractBoard diversity plays a significant role in determining a corporate cash hoarding policy as it influences investment decisions and financial flexibility. This study investigates how investor protection laws moderate the relationship between board diversity and corporate cash hoarding in Europe. Using a sample of 484 listed firms from European capital markets during the period 2015–2023, the analysis captures the influence of board gender diversity on cash reserves and how investor protection levels (high/low) moderate such a relationship. These variables and vital control variables of cash holdings are examined using a panel fixed-effects model and generalized methods of moment (GMM), along with diagnostic tests of model validity. The empirical results reveal that the presence of female directors on the board positively affects corporate cash hoarding, and thus, this effect is more pronounced in countries with high and low investor protection. Additionally, the presence of female executives on the board tends to exhibit more cash reserves and liquidity buffers. The results also provide ample evidence that the high and low levels of investor protection strengthen the positive effect of gender diversity on cash hoarding. This study offers significant theoretical and practical implications for regulators, policymakers, and investors, providing suggestions on the use of investment decisions and contributing to the stability of liquidity management in European capital markets.