Examining the joint effect of board composition and board leadership on cash management: insights from Malaysian corporations

Purpose This paper aims to examine the joint effect of board composition and board leadership on abnormal cash holdings and the speed with which firms with surplus and those with deficit cash adjust their cash ratios. Design/methodology/approach Utilizing data from firms listed on Bursa Malaysia from 2015 to 2021, the study employs the generalized method of moments (GMM) to address endogeneity and explore the impact of board attributes on cash management. Findings The results show that independent female directors and women in CEO duality make more efficient cash management by reducing abnormal cash holdings and quickly adjusting toward optimal cash levels. Practical implications The results offer important practical implications for various stakeholders. For policymakers, the findings provide insights into designing regulatory frameworks that strengthen corporate governance through stricter board tenure rules or mandating gender diversity quotas. For corporate managers, the research provides insights for effectively adjusting their cash levels to align with optimal targets. Investors are advised to focus on firms with effective governance structures to enhance their portfolio safety. Originality/value The study is the first to explore the joint effect of board composition and board leadership on abnormal cash holdings and downward and upward adjustments.