Corporate Cash Holdings and Investment Efficiency: Do Women Directors and Financial Crisis Matter?

Abstract

This study investigates the relationship between corporate cash holdings and investment efficiency, with a focus on how COVID-19 and the presence of women directors may influence this relationship. Using data from Indonesian public companies during the COVID-19 period, comprising 2350 firm-year observations, we employ fixed-effect regression models with industry and year controls to test our hypotheses. Robustness and endogeneity tests are conducted to ensure the reliability of our findings. Our research reveals that companies with larger cash reserves tend to experience decreased investment efficiency during the COVID-19 crisis. Moreover, the negative impact of substantial cash reserves on investment efficiency is exacerbated by the presence of female directors on the board. However, our findings also suggest that female directors can mitigate the adverse effects of excessive cash reserves on a company’s investment efficiency, particularly during unforeseen economic challenges such as the pandemic.