Composition of boards of directors and cash liquidity of Brazilian companies in periods of economic crisis
Keywords:
Board of directors; Cash holdings; Economic crises.
Abstract
Objective: To analyze the relationship between the composition of boards of directors and cash holdings in periods of economic crisis in publicly traded Brazilian non-financial companies listed on B3 between 2010 and 2020.
Gap: Researches that analyze the composition of the board of directors as a determinant of companies' cash volume in periods of economic crises are still little explored in underdeveloped markets, which makes the research relevant to the Brazilian scenario.
Methodology: The research has an empirical and quantitative approach. Data were extracted from the Economática database and from company reference forms available on the Securities Commission (CVM) website and the main results are evidenced using four estimation methods (Fixed Effects, Tobit, GMM and MQ2E).
Relevance: Stakeholders should pay attention to the fact that corporate governance practices such as the proper composition of boards play an important role in the formulation of strategies that help the company's management to face adverse moments caused by economic restrictions in periods of crisis.
Impact: As practical implications, the evidence shown in this research shows that the composition of boards of directors causes different behaviors in the cash holdings of companies in periods of crisis, and therefore such composition can affect the financial policy of the company.
Results and contributions: The duality of the Chief Executive Office (CEO) and the independence of the board negatively impact cash holdings in periods of economic crisis, while the size of the board has a positive impact on cash holdings. No evidence was found that the proportion of women and directors with financial expertise impacts cash holdings in times of crisis. The research contributes to the understanding that the structure of corporate governance influences the financial policy of the company, even in periods of economic crisis.
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References
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Atif, M., Liu, B., & Huang, A. (2019). Does board gender diversity affect corporate cash holdings?. Journal of Business Finance & Accounting, 46(7-8), 1003-1029.
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Bertoni, F., Meoli, M., & Vismara, S. (2014). Board independence, ownership structure and the valuation of IPOs in continental E urope. Corporate Governance: An International Review, 22(2), 116-131.
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Deman, R., Jorissen, A., & Laveren, E. (2018). Board monitoring in a privately held firm: When does CEO duality matter? The moderating effect of ownership. Journal of Small Business Management, 56(2), 229-250.
Diaw, A. (2021). Corporate cash holdings in emerging markets. Borsa Istanbul Review, 21(2), 139-148.
dos Santos, J. É. (2021). A influência do board interlocking no custo de capital de terceiros. Revista de Contabilidade e Organizações, 15, e176516-e176516.
Drobetz, W., & Grüninger, M. C. (2007). Corporate cash holdings: Evidence from Switzerland. Financial Markets and Portfolio Management, 21(3), 293-324.
Farag, H., & Mallin, C. (2017). Board diversity and financial fragility: Evidence from European banks. International Review of Financial Analysis, 49, 98-112.
Ferreira, M. P., & Vicente, E. F. R. (2020). Effect of the structure of the board of directors on cash holdings of publicly traded companies. Contextus–Revista Contemporânea de Economia e Gestão, 18, 275-289.
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Guest, P. M. (2008). The determinants of board size and composition: Evidence from the UK. Journal of Corporate Finance, 14(1), 51-72.
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Hugonnier, J., Malamud, S., & Morellec, E. (2015). Capital supply uncertainty, cash holdings, and investment. The Review of Financial Studies, 28(2), 391-445.
Im, H. J., Park, H., & Zhao, G. (2017). Uncertainty and the value of cash holdings. Economics Letters, 155, 43-48.
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Jackling, B., & Johl, S. (2009). Board structure and firm performance: Evidence from India's top companies. Corporate Governance: An International Review, 17(4), 492-509.
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Jiang, J., & Wu, S. (2022). The effects of cash-holding motivation on cash management dynamics. Research in International Business and Finance, 59, 101542.
Kusumawardani, A., Wardhani, W., Maria, S., & Yudaruddin, R. (2021). BOARD STRUCTURE AND DISCLOSURE OF INTELLECTUAL CAPITAL: AN EMPIRICAL STUDY IN AN EMERGING MARKET. Journal of Governance and Regulation/Volume, 10(3).
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Acharya, V. V., Almeida, H., & Campello, M. (2013). Aggregate risk and the choice between cash and lines of credit. The Journal of Finance, 68(5), 2059-2116.
Adams, R. B., Akyol, A. C., & Verwijmeren, P. (2018). Director skill sets. Journal of Financial Economics, 130(3), 641-662.
Adams, R. B., Hermalin, B. E., & Weisbach, M. S. (2010). The role of boards of directors in corporate governance: A conceptual framework and survey. Journal of economic literature, 48(1), 58-107.
Akhtar, T., Tareq, M. A., & Rashid, K. (2020). Chief Executive Officers’ monitoring, board effectiveness, managerial ownership, and cash holdings: evidence from ASEAN. Review of Managerial Science, 1-46.
Anderson, R. C., Reeb, D. M., Upadhyay, A., & Zhao, W. (2011). The economics of director heterogeneity. Financial Management, 40(1), 5-38.
Atif, M., Liu, B., & Huang, A. (2019). Does board gender diversity affect corporate cash holdings?. Journal of Business Finance & Accounting, 46(7-8), 1003-1029.
Barbosa, F. D. H. (2017). A crise econômica de 2014/2017. Estudos avançados, 31, 51-60.
Bates, T. W., Kahle, K. M., & Stulz, R. M. (2009). Why do US firms hold so much more cash than they used to?. The journal of finance, 64(5), 1985-2021.
Benkraiem, R., Gurau, C., Hoang, T. H. V., Lahiani, A., & Seran-Luu, T. (2021). Bank leverage choices of French SMEs: a quantile analysis. International Journal of Entrepreneurship and Small Business, 43(4), 570-597.
Bernile, G., Bhagwat, V., & Yonker, S. (2018). Board diversity, firm risk, and corporate policies. Journal of financial economics, 127(3), 588-612.
Bertoni, F., Meoli, M., & Vismara, S. (2014). Board independence, ownership structure and the valuation of IPOs in continental E urope. Corporate Governance: An International Review, 22(2), 116-131.
Bhat, K. U., Chen, Y., Jebran, K., & Memon, Z. A. (2019). Board diversity and corporate risk: evidence from China. Corporate Governance: The International Journal of Business in Society.
Bigelli, M., & Sánchez-Vidal, J. (2012). Cash holdings in private firms. Journal of Banking & Finance, 36(1), 26-35.
Boubaker, S., Derouiche, I., & Nguyen, D. K. (2015). Does the board of directors affect cash holdings? A study of French listed firms. Journal of Management & Governance, 19(2), 341-370
Burger, A., Damijan, J. P., Kostevc, Č., & Rojec, M. (2017). Determinants of firm performance and growth during economic recession: The case of Central and Eastern European countries. Economic Systems, 41(4), 569-590.
Cambrea, D. R., Calabrò, A., La Rocca, M., & Paolone, F. (2021). The impact of boards of directors’ characteristics on cash holdings in uncertain times. Journal of Management and Governance, 1-33.
Cambrea, D. R., Tenuta, P., & Vastola, V. (2019). Female directors and corporate cash holdings: monitoring vs executive roles. Management Decision.
Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity, and firm value. Financial review, 38(1), 33-53
Chang, Y., Benson, K., & Faff, R. (2017). Are excess cash holdings more valuable to firms in times of crisis? Financial constraints and governance matters. Pacific-Basin Finance Journal, 45, 157-173.
Chen, Y. R., & Chuang, W. T. (2009). Alignment or entrenchment? Corporate governance and cash holdings in growing firms. Journal of Business Research, 62(11), 1200-1206.
Chen, Y. R., & Chuang, W. T. (2009). Alignment or entrenchment? Corporate governance and cash holdings in growing firms. Journal of Business Research, 62(11), 1200-1206.
Costa, L., Sampaio, J. D. O., & Flores, E. S. (2019). Diversidade de gênero nos conselhos administrativos e sua relação com desempenho e risco financeiro nas empresas familiares. Revista de Administração Contemporânea, 23, 721-738.
Crisóstomo, V. L., Iturriaga, F. J. L., & González, E. V. (2014). Financial constraints for investment in Brazil. International Journal of Managerial Finance.
De Oliveira, T., Jesuka, D., Peixoto, F. M., & Tizziotti, C. P. P. (2021). A Sustentabilidade e a Covid-19 afetam o Desempenho, o Valor e o Risco de Firmas no Brasil?. Advances in Scientific and Applied Accounting, 227-239.
Deman, R., Jorissen, A., & Laveren, E. (2018). Board monitoring in a privately held firm: When does CEO duality matter? The moderating effect of ownership. Journal of Small Business Management, 56(2), 229-250.
Diaw, A. (2021). Corporate cash holdings in emerging markets. Borsa Istanbul Review, 21(2), 139-148.
dos Santos, J. É. (2021). A influência do board interlocking no custo de capital de terceiros. Revista de Contabilidade e Organizações, 15, e176516-e176516.
Drobetz, W., & Grüninger, M. C. (2007). Corporate cash holdings: Evidence from Switzerland. Financial Markets and Portfolio Management, 21(3), 293-324.
Farag, H., & Mallin, C. (2017). Board diversity and financial fragility: Evidence from European banks. International Review of Financial Analysis, 49, 98-112.
Ferreira, M. P., & Vicente, E. F. R. (2020). Effect of the structure of the board of directors on cash holdings of publicly traded companies. Contextus–Revista Contemporânea de Economia e Gestão, 18, 275-289.
Filbeck, G., Louie, K., & Zhao, X. (2014). The impact of the Euro crisis on the financial performance of european and north american firms. International Journal of Finance & Economics, 19(3), 173-187.
Garcia-Sanchez, I. M., Martínez-Ferrero, J., & García-Meca, E. (2017). Gender diversity, financial expertise and its effects on accounting quality. Management Decision.
Germain, L., Galy, N., & Lee, W. (2014). Corporate governance reform in Malaysia: Board size, independence and monitoring. Journal of Economics and Business, 75, 126-162.
Gill, A., & Shah, C. (2012). Determinants of corporate cash holdings: Evidence from Canada. International journal of economics and finance, 4(1), 70-79.
Guest, P. M. (2008). The determinants of board size and composition: Evidence from the UK. Journal of Corporate Finance, 14(1), 51-72.
Guizani, A., Lakhal, F., & Lakhal, N. (2018). The cash flow sensitivity of cash in family firms: does the board of directors matter?. Managerial Finance.
Gujarati, D., & Porter, D. (2010). Econometría, Mexico DF: McGRAW-HILL.
Han, S., & Qiu, J. (2007). Corporate precautionary cash holdings. Journal of corporate finance, 13(1), 43-57.
Harford, J., Mansi, S. A., & Maxwell, W. F. (2008). Corporate governance and firm cash holdings in the US. Journal of financial economics, 87(3), 535-555.
Harris, M., & Raviv, A. (2008). A theory of board control and size. The Review of Financial Studies, 21(4), 1797-1832.
Hugonnier, J., Malamud, S., & Morellec, E. (2015). Capital supply uncertainty, cash holdings, and investment. The Review of Financial Studies, 28(2), 391-445.
Im, H. J., Park, H., & Zhao, G. (2017). Uncertainty and the value of cash holdings. Economics Letters, 155, 43-48.
Inaba, K. I. (2021). Corporate cash and governance: A global look into publicly-traded companies' aggregate cash ratios. International Review of Financial Analysis, 78, 101808.
Iskandar-Datta, M. E., & Jia, Y. (2014). Investor protection and corporate cash holdings around the world: new evidence. Review of Quantitative Finance and Accounting, 43(2), 245-273.
Jackling, B., & Johl, S. (2009). Board structure and firm performance: Evidence from India's top companies. Corporate Governance: An International Review, 17(4), 492-509.
Javadi, S., Mollagholamali, M., Nejadmalayeri, A., & Al-Thaqeb, S. (2021). Corporate cash holdings, agency problems, and economic policy uncertainty. International Review of Financial Analysis, 77, 101859.
Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American economic review, 76(2), 323-329.
Jiang, J., & Wu, S. (2022). The effects of cash-holding motivation on cash management dynamics. Research in International Business and Finance, 59, 101542.
Kusumawardani, A., Wardhani, W., Maria, S., & Yudaruddin, R. (2021). BOARD STRUCTURE AND DISCLOSURE OF INTELLECTUAL CAPITAL: AN EMPIRICAL STUDY IN AN EMERGING MARKET. Journal of Governance and Regulation/Volume, 10(3).
Lehn, K. M., Patro, S., & Zhao, M. (2009). Determinants of the size and composition of US corporate boards: 1935‐2000. Financial management, 38(4), 747-780.
Linck, J. S., Netter, J. M., & Yang, T. (2008). The determinants of board structure. Journal of financial economics, 87(2), 308-328.
Liu, Q., Luo, T., & Tian, G. G. (2015). Family control and corporate cash holdings: Evidence from China. Journal of corporate finance, 31, 220-245.
Lohe, F. W., & Calabrò, A. (2017). Please do not disturb! Differentiating board tasks in family and non-family firms during financial distress. Scandinavian Journal of Management, 33(1), 36-49.
Lopes, P. F., Costa, D. F., de Melo Carvalho, F., & de Castro Júnior, L. G. (2016). Desempenho econômico e financeiro das empresas brasileiras de capital aberto: um estudo das crises de 2008 e 2012. Revista Universo Contábil, 12(1), 105-121.
Machokoto, M., Chipeta, C., & Ibeji, N. (2021). The institutional determinants of peer effects on corporate cash holdings. Journal of International Financial Markets, Institutions and Money, 73, 101378.
Maheshwari, Y., & Rao, K. V. (2017). Determinants of corporate cash holdings. Global Business Review, 18(2), 416-427.
Maheshwari, Y., & Rao, K. V. (2017). Determinants of corporate cash holdings. Global Business Review, 18(2), 416-427.
Manoel, A. A. S., Moraes, M. B. C., Nagano, M. S., & Sobreiro, V. A. (2018). Cash holdings and corporate governance: The effects of premium listing in Brazil. Review of development finance, 8(2), 106-115.
Martín, C., & Herrero, B. (2018). Boards of directors: composition and effects on the performance of the firm. Economic research-Ekonomska istraživanja, 31(1), 1015-1041.
MengYun, W., Husnain, M., Sarwar, B., & Ali, W. (2021). Board Financial Expertise and Corporate Cash Holdings: Moderating Role of Multiple Large Shareholders in Emerging Family Firms. Complexity, 2021.
Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American economic review, 48(3), 261-297.
Monem, R. M. (2013). Determinants of board structure: Evidence from Australia. Journal of Contemporary Accounting & Economics, 9(1), 33-49.
Mortal, S., Nanda, V., & Reisel, N. (2020). Why do private firms hold less cash than public firms? International evidence on cash holdings and borrowing costs. Journal of Banking & Finance, 113, 105722.
Myers, S. C. (1984). Finance theory and financial strategy. Interfaces, 14(1), 126-137.
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of financial economics, 13(2), 187-221.
Orlova, S. V., & Sun, L. (2018). Institutional determinants of cash holdings speed of adjustment. Global Finance Journal, 37, 123-137.
Qin, X., Huang, G., Shen, H., & Fu, M. (2020). COVID-19 pandemic and firm-level cash holding—moderating effect of goodwill and goodwill impairment. Emerging Markets Finance and Trade, 56(10), 2243-2258.
Raheja, C. G. (2005). Determinants of board size and composition: A theory of corporate boards. Journal of financial and quantitative analysis, 40(2), 283-306.
Ranajee, R., & Pathak, R. (2019). Corporate cash holding during crisis and beyond: what matters the most. International Journal of Managerial Finance.
Rhode, D. L., & Packel, A. K. (2014). Diversity on corporate boards: How much difference does difference make. Del. J. Corp. L., 39, 377.
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Published
2025-01-17
How to Cite
Éliton dos Santos, J. (2025). Composition of boards of directors and cash liquidity of Brazilian companies in periods of economic crisis. Enfoque: Reflexão Contábil, 44(1), 161-180. https://doi.org/10.4025/enfoque.v44i1.67030
Section
Original Articles
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