Board independence, family directors and corporate cash holdings: evidence from the Tunisian stock exchange

Purpose The main purpose of this article is to examine the impact of board independence on corporate cash holdings and test the moderating effect of family directors on this relationship in an emerging economy, namely Tunisia, over the period of 2012–2023. Design/methodology/approach Multiple regression analysis is used with a fixed-effects estimator. In addition, the generalized method of moments (GMM) estimator was performed to control for the endogeneity problem. Findings Empirical findings show that board independence is negatively associated with corporate cash holdings, while family dominant position on the board is positively associated with the same variable. The negative effect of board independence on cash holdings becomes positive for corporate boards characterized by a high presence of family directors. Originality/value With respect to researchers, this study explores the interaction that may exist between family directors and independent directors with respect to cash holding policy. With respect to investors, if they have a short-term objective and prioritize dividend distribution, they should select a firm characterized by a low percentage of family directors on the board to benefit from a high dividend payout ratio. Policy makers should also take into account our findings by adopting corporate governance guidelines to limit the discretionary power of family directors within Tunisian listed companies.