1. Introduction
Over the past two decades, the rise in weather disasters, global warming, and the COVID-19 pandemic have brought CSR and green initiatives to the forefront of global attention, prompting regulators to push for greater transparency from corporations (Buhaya and Metwally 2024; Xue 2023). As a result, many stock exchanges across the world have introduced CSR frameworks and guidelines for listed companies, encouraging the publication of CSR reports, whether voluntarily or by mandate (Metwally et al. 2024). Research indicates that both the public and regulators favor stricter disclosure requirements, as these can lead to positive societal benefits (Chen et al. 2018) and help alleviate corporate governance issues (Liu and Tian 2021; Metwally et al. 2024). However, enhanced disclosure can also bring additional costs and potentially lower a company’s profitability (Chen et al. 2018; Xue 2023).
In less developed countries (LDCs), the CSR literature recently connected being a socially responsible organization with many themes such as legitimizing corporate actions through enhancing earnings quality and overall performance or increasing firm value (Aboud and Diab 2018; El-Bassiouny and Letmathe 2018). Another stream of studies has explored how CSR influences creativity initiatives (Abdelmotaleb et al. 2018), implementation variations, and problems due to social and political challenges (Diab and Metwally 2020), and in some cases, have been used as a means to justify cost cutting (Metwally et al. 2022), and earning management (Abdelfattah and Elfeky 2021). Other areas of investigation include opacity (Kim and Yoo 2022; Metwally et al. 2024), and tax incentives and avoidance strategies (Du and Li 2023). Finally, many recent studies started to connect CSR with the level of cash holdings (CHs) (Arouri and Pijourlet 2017; Chan et al. 2022; Choi and Ryu 2021; Lu et al. 2017; Nasr et al. 2020; Xue 2023).
Firms may accumulate cash reserves for precautionary purposes, for transactional needs, or due to agency problems, where self-interested behavior by management or majority shareholders drives the decision (Ahmed and Hussain 2024; Ali et al. 2024; Elamer and Utham 2024; Yin and Yang 2023). Alternatively, firms may reduce their cash reserves through dividend payouts, investments aimed at maximizing shareholder value, or expenditures on research and development (Xue 2023).
Considering how crucial CHs are, the literature has extensively explored the underlying motives behind the increased levels of CHs (Elamer and Utham 2024; Gao et al. 2013; Jensen 1986; Opler et al. 1999). The broad range of themes in CSR research arises from efforts to connect its practices to ethical standards and optimal corporate strategies. CSR activities are often viewed as indicators of firms that embrace ethical, environmentally responsible policies while promoting sustainable community development (Alnaim and Metwally 2024; Buhaya and Metwally 2024; Rakia et al. 2023). However, some managers may exploit CSR disclosures to mask deficiencies in financial transparency, engaging in opportunistic behavior to obscure weak financial reporting practices (Abdelfattah and Elfeky 2021). To reduce this exploitation, many studies concentrated on corporate governance mechanisms, one of the main factors in the literature being board gender diversity (BGD) (Ahmed and Hussain 2024; Ali et al. 2024; Elamer and Utham 2024; Hassanein and Kokel 2022; Nadia and Hanafi 2023; Nasr et al. 2020; Zeng and Wang 2015).
Recently, the emphasis on BGD in corporate boardrooms gained increased significant attention in the past two decades (Abdelazim et al. 2023; Abdelkader et al. 2024; Adams and Ferreira 2009; Ahmed and Hussain 2024; Faccio et al. 2016; Huang and Kisgen 2013; Nadia and Hanafi 2023; Nasr et al. 2020; Zeng and Wang 2015). BGD is often associated with an increased level of conservatism in managing company resources, reflecting less risky decisions when females are appointed to boardrooms (Abdelazim et al. 2023; Alkhawaja et al. 2023; Bates et al. 2009). This aligns with broader evidence suggesting that gender-balanced leadership contributes to enhanced firm performance, more proactive CSR strategies, and better management of any crisis (Ali et al. 2024; Amin et al. 2023; Elamer and Utham 2024; Hu et al. 2023; Lu et al. 2022).
However, the role of BGD as a determinant of the level of CHs remains a debatable dilemma. As some studies found that BGD will lead to an increased retention of CHs as their conservatism and rational decision-making tendency will lead to having more CHs to be able to move forward especially in times of crisis (e.g., COVID-19), other studies reported that BGD will lead to a little amount of opportunistic behavior by managers and in return will reduce the amount of CHs in firms (Ahmed and Hussain 2024; Faccio et al. 2016; Hu et al. 2023; Nadia and Hanafi 2023; Nasr et al. 2020; Zeng and Wang 2015). These conflicting results as well as the differences in contextual ramifications, and theoretical frameworks implemented in these studies, make it not clear how BGD actually affects the level of CHs.
This guided us to investigate if gender diversity has an impact on the association between CSR and CHs. As most of the earlier-mentioned studies concentrate on the direct relationship between BGD and CHs, one exception is Nasr et al. (2020), who examined the gender diversity moderating impact on the relationship between CSR and CHs in the French context and found that gender diversity negatively moderates the relationship and leads to a lesser level of CHs when present in a boardroom. Having said this, we aim to extend CSR, gender diversity, and the CH literature (Ahmed and Hussain 2024; Al-Najjar and Clark 2017; Ali et al. 2024; Arouri and Pijourlet 2017; Choi and Ryu 2021; Elamer and Utham 2024; Hassanein and Kokel 2022; Jadiyappa et al. 2021; Nasr et al. 2020; Yang and Susanto 2021) through shedding light on a blind spot in the CSR and level of the CH literature. The scarcity of studies that connect CSR, BGD, and the level of CHs underscores a significant research gap in the literature, particularly concerning the nuanced role of gender diversity in shaping CH levels within the context of CSR practices.
The Egyptian market presents a compelling market for investigation due to its unique characteristics. These distinct features include a range of regulatory and structural changes that may influence the impact of CSR on CH levels and the moderating role of gender diversity. In the 1990s, the Egyptian government started major transformation in the economic system, shifting from a centrally planned economy dominated by government control to one that embraces economic reforms, privatization, and open-market policies (Abdelazim et al. 2023; Ali et al. 2024; Diab et al. 2023; Metwally et al. 2024). This era also saw advancements in the country’s accounting standards, particularly in the late 1990s, aimed at improving the financial reporting quality within the stock exchange (Metwally et al. 2021; Metwally 2022). However, unlike more developed markets, where international standards have been widely adopted, the Egyptian market continues to face challenges from government interventions and regulatory constraints that hinder its full alignment with global practices, despite ongoing development efforts (Abdelazim et al. 2023; Diab et al. 2023; Diab and Metwally 2020).
What makes the Egyptian firms’ CHs specifically worth studying is the Egyptian government’s decision to implement currency floating measures in 2013. This raised significant alarm among stakeholders, as the Egyptian pound saw a marked decline in value against foreign currencies (Elewa and Mahmoud 2023). This depreciation introduced considerable financial risks, particularly operational and credit-related, leaving many stakeholders uncertain about the future. In response, businesses increasingly opted to hold more local currency reserves to hedge against unpredictable exchange rate shifts (El-Halaby et al. 2021). Since numerous companies rely on international financing or import large quantities of raw materials, the volatility sparked fears across the business community. To address these concerns, the Egyptian government enacted reforms to the corporate governance framework, aiming to improve managerial accountability, ease anxieties, and bring greater stability to the market (Ali et al. 2024).
Having said this, it is imperative to investigate CSR and CH levels within the unique institutional context of Egypt, which differs from the well-established and stable markets. This study aims to determine whether recent economic, governance, regulatory, and accounting advancements have been sufficient to improve CSR, BGD, and CHs in Egypt. That is, the current study aims to answer two central questions to realize the moderating role of BGD in the Egyptian context: (1) What is the influence of CSR on the level of CHs? (2) Does BGD moderate the relationship between CSR and the CH level? Our results reveal a positive significant relationship between CSR and the CH level. Further, BGD is found to have a negative moderating role as it weakens the effect of CSR on CHs. Consequently, this study offers evidence that gender diversity is one of the factors that affect cash holding levels.
Numerous significant literary contributions are made by this study. First, unlike most prior research, which has focused on developed economies, this study examines the distinct business environment of a developing country—Egypt. As the leading emerging market in Africa and the Middle East region (Metwally et al. 2021; Metwally 2022), Egypt shares unique characteristics with other countries in the Middle East region, particularly following the 2011 and 2013 political upheavals and the Arab Spring (Abdelazim et al. 2023; Ali et al. 2024; Metwally et al. 2024). In that sense, the current study shed light on a blind spot in the CSR and level of the CH literature, particularly concerning the nuanced role of gender diversity in shaping CH levels within the context of CSR practices. Second, this research explores if BGD moderates the relationship between CSR and CHs within this emerging market context. Third, the results of this study aim to offer actionable recommendations for potential investors, shareholders, and regulators in emerging markets with comparable economic, political, and social dynamics to Egypt. Companies are encouraged to prioritize gender diversity in board appointments, while regulators should track and promote female representation in all listed firms. Investors are advised to focus on boards with strong female representation and high CSR disclosure. Finally, this study differentiates itself by employing stakeholders and agency theories as comprehensive theoretical frameworks, both to guide the formulation of testable hypotheses and to explain the study’s outcomes.
The remainder of this paper is structured as follows. Section 2 introduces the theoretical framework guiding this research. Section 3 reviews the relevant literature and outlines the development of hypotheses. Section 4 describes the research methodology and analytical approach. Section 5 presents the empirical results and discusses their significance. Section 6 expands the analysis by integrating additional control variables. Finally, Section 7 offers concluding insights, discusses limitations, and suggests future research opportunities.
2. Theoretical Framework
The impact of CSR on CHs was connected mainly to legitimacy and agency theories in most of the studies that reported positive relation between CSR and CHs (Choi and Ryu 2021; Nasr et al. 2020). However, many other theories and perspectives were deployed to explain this relationship. These theories include pecking order theory, and stakeholders (Ali et al. 2024; Jadiyappa et al. 2021). According to agency theory, as proposed by Jensen and Meckling (1976), CSR initiatives may be perceived as a misallocation of corporate resources if they fail to enhance the firm value. Companies engaged in CSR are often linked to heightened agency problems, where managerial opportunism leads executives to use CSR practices as a means to deflect shareholder scrutiny, resulting in the inefficient use of corporate assets. Such initiatives are viewed as exacerbating agency issues, providing insiders with private benefits at the expense of the firm (Barnea and Rubin 2010). Jiraporn and Chintrakarn (2013) further argue that firms committed to CSR tend to exhibit greater agency problems, marked by the dissipation of financial resources, including the misuse of CHs.
Conversely, Suchman (1995) contends that for companies to maintain societal acceptance, their activities must align with societal expectations, ensuring the legitimacy required to continue operations. If legitimacy is compromised, society can effectively withdraw its approval, hindering the company’s ability to function (Deegan and Rankin 1997; Guthrie and Parker 1989). CSR plays a critical role in this process by enhancing a firm’s legitimacy (Patten 1992), and improving its public image and reputation (Gray et al. 1988). Almahrog et al. (2016) suggest that CSR serves as a communication tool, signaling a firm’s commitment to broader stakeholder interests.
According to Suchman (1995) legitimacy theory, firms engage in CSR activities to align themselves with the established norms, values, and expectations of their various stakeholders. By doing so, companies aim to strengthen their legitimacy, which can lead to benefits such as enhanced sustainability, improved employee morale, reduced risk, and overall operational longevity. The theory assumes that management plays a key role in actively managing this legitimation process. Jo and Harjoto (2012) argue that CSR is supposed to reduce conflicts of interest between stakeholders and managers, curbing managerial opportunism and promoting shareholder value. Similarly, Lu et al. (2017) find that CSR disclosures are positively linked to CH value, indicating that CSR can support financial resilience and stability, which leads to an increased amount of CHs (Nasr et al. 2020).
How BGD is connected was explained in accounting research through deploying different theories (Abdelazim et al. 2023; Ramadan and Hassan 2022). In this research, we will concentrate on the agency theory perspective to understand the gender diversity moderating role in the relationship between CSR and CHs. According to agency theory, female representation on boards has shown enhancements in governance and its mechanisms (Adams and Ferreira 2009). Female directors contribute to resolving governance challenges, strengthening board oversight, curbing managerial private benefits, and improving board effectiveness (Carter et al. 2003). Adams and Ferreira (2009) also highlight that female directors tend to be more engaged in board meetings, which enhances oversight functions and leads to a reduction in agency costs, thereby aligning the interests of executives with those of shareholders. Furthermore, recent studies suggest that gender diversity improves decision-making quality. Boards with female representation are often seen as more independent and objective (Lückerath-Rovers 2013). The appointment of women to boards can thus be viewed as a robust monitoring mechanism, positively influencing corporate decision making, including policies related to CHs (Ahmed and Hussain 2024; Nasr et al. 2020).
3. Literature Review and Hypothesis Development
3.1. CSR and Level of CHs
The study of CHs traces back to the late 1930s with the advent of Keynes’ liquidity preference theory (Keynes 1936). From a theoretical standpoint, managers hold cash for several reasons: as a ready-to-use asset to seize investment and available opportunities, or to be able to face any sudden emergency (Almeida et al. 2004). By retaining significant cash reserves, firms reduce their reliance on external financing, which often involves substantial transaction costs (La Rocca and Cambrea 2019).
Furthermore, the rationale for holding cash aligns with the pecking order theory, which posits that market uncertainty exacerbates information asymmetry, thereby straining the relationship between investors and management (Ali et al. 2024). This dynamic elevates the cost of financing and increases the risks associated with external market funding. In response, managers adopt a defensive posture, retaining cash as a less expensive and lower-risk form of financing (Myers and Majluf 1984).
Additionally, under agency theory, substantial CHs may amplify managerial opportunism if not properly regulated through robust governance mechanisms. In the absence of such controls, cash retention can exacerbate agency problems and inflate agency costs (Jensen and Meckling 1976). This issue is particularly pronounced in LDCs where governance mechanisms are often weak. In such environments, managers have been observed to engage in opportunistic behaviors, using excess cash for personal gain or investing in activities that benefit them in the short or long term, rather than returning these funds to shareholders (Dittmar and Mahrt-Smith 2007).
Regarding how CSR impacts CHs, two contrasting perspectives exist on how investors translate the excess CHs with high CSR engagement. One perspective, rooted in agency theory, suggests that CSR activities may serve as a tool for managers to gain personal benefits for self-interests (Fabrizi et al. 2014; Jadiyappa et al. 2021; Nasr et al. 2020). According to this view, managers may implement CSR policies to increase their influence within the firm (Fabrizi et al. 2014; Jadiyappa et al. 2021). Consequently, this agency perspective argues that high CSR performance may be indicative of managerial entrenchment, which negatively affects the value of CHs (Dittmar and Mahrt-Smith 2007). Investors, therefore, may assign a lower value to cash in firms with high CSR involvement, anticipating that such resources are more likely to be used for managerial self-interest (Jadiyappa et al. 2021; Nasr et al. 2020).
Conversely, the conflict-resolution view of CSR posits that CSR activities help managers resolve conflicts with stakeholders and ultimately enhance shareholder value (Arouri and Pijourlet 2017; Jadiyappa et al. 2021; Jiraporn and Chintrakarn 2013; Jo and Harjoto 2012). Here, CSR activities are seen as tools for mitigating tensions and fostering positive relationships with stakeholders, consistent with stakeholder theory (Arouri and Pijourlet 2017), or to legitimize the actions of the management (Nasr et al. 2020). Having said this, CSR policies can help managers secure stakeholder loyalty and reduce uncertainty. High CSR performance, in this view, aligns stakeholder management with long-term value creation, enhancing the firm’s financial sustainability and operational efficiency.
Further evidence suggests that CSR is also employed as a tool for managerial entrenchment to preserve power. For instance, CEOs may engage in CSR to secure stakeholder support (Arouri and Pijourlet 2017), or use CSR investments to forge alliances that protect them from the risk of being fired after earnings manipulation (Prior et al. 2008). The current study conforms to the strand of research that sees that CSR may contribute to inefficiency in cash use by aligning more with managerial self-interest than shareholder value, with higher CSR performance linked to increased managerial entrenchment, thereby negatively impacting the effectiveness of cash management (Chan et al. 2022; Jadiyappa et al. 2021; Nasr et al. 2020; Yang and Susanto 2021; Yin and Yang 2023). Under this view, investors are likely to assign a lower value to CHs in high-CSR firms, anticipating that managers may misuse these resources for personal gain. Consequently, we articulate our initial hypothesis as follows:
There is an association between CSR and the level of CHs.
3.2. BGD Moderating Effect
Recently, the emphasis on gender diversity in corporate boardrooms gained increased significant attention in the past two decades (Abdelazim et al. 2023; Abdelkader et al. 2024; Ahmed and Hussain 2024; Nadia and Hanafi 2023; Nasr et al. 2020; Zeng and Wang 2015). Gender diversity studies concentrated on its positive impact on prudent resource management practices, stemming from the generally higher risk aversion observed among female directors (Adhikari 2018; Alkhawaja et al. 2023; Garcia-Blandon et al. 2022). This conservatism is consistent with broader evidence linking gender diversity in leadership with improvements in corporate performance, greater commitment to social responsibility, and superior crisis management (Abdelazim et al. 2023; Amin et al. 2023; Hu et al. 2023; Lu et al. 2022). This growing body of evidence has fueled the international trend towards implementing gender quotas in board appointments (Elamer and Utham 2024).
Maintaining cash reserves is crucial for a company’s day-to-day operations, acting as a safeguard against financial unpredictability, investment shortfalls, and the expenses associated with transactions (Ali et al. 2024; Almeida et al. 2004; Bates et al. 2009). The literature underscores the importance of maintaining precautionary cash reserves to protect a firm’s income from disruptions in cash flow and inefficiencies in capital markets (Almeida et al. 2004; Bates et al. 2009; Ferreira and Vilela 2004; Gao et al. 2013). The optimal level of cash reserves is contingent on firm-specific factors such as the industrial sector, company size, and capital structure. However, excessive CHs can exacerbate agency problems, with managers potentially allocating surplus cash towards activities that reduce firm value, while claiming operational necessity (Ahmed and Hussain 2024; Jensen 1986).
Firms with strong governance structures, particularly those with diverse and inclusive boards, tend to demonstrate enhanced oversight of management decisions, including more critical evaluations of cash retention strategies (Carter et al. 2010). The core of the agency problem lies in the separation between owners and managers, who may be incentivized to retain excess cash for self-serving purposes, often at the expense of shareholder interests (Ali et al. 2024; Jensen 1986). When managers utilize cash reserves for personal gains rather than returning value to shareholders, it reflects a governance failure, allowing for opportunistic behaviors and inefficiency in resource allocation (Dittmar and Mahrt-Smith 2007). Thus, robust governance frameworks, particularly those featuring board diversity, are vital for preventing such agency issues and ensuring that CHs are strategically aligned with shareholder value (Ahmed and Hussain 2024).
Empirical studies consistently demonstrate that gender-diverse boards, particularly those with female directors, enhance the effectiveness of corporate governance and monitoring functions. Adams and Ferreira (2009) provide evidence that female directors increase executive accountability, resulting in improved attendance and stronger oversight mechanisms. This heightened vigilance strengthens board performance. Furthermore, diverse boards mitigate the risk of group thinking, enriching discussions and leading to more informed decision making (Ahmed and Hussain 2024), which, in turn, enhances board effectiveness (Chen and Hassan 2022). Characteristics such as rigorous monitoring, a commitment to equity, and superior management abilities are often associated with female directors (Daily and Dalton 2003). Additionally, women on boards are generally less prone to engaging in unethical behaviors for personal gain at the expense of stakeholders (Issa and Zaid 2021). Consequently, the inclusion of female directors significantly bolsters the board’s capacity to monitor effectively, thereby protecting shareholder interests (Ahmed and Hussain 2024).
Studies examining the link between gender diversity and CHs have produced varying results depending on the setting (Ezeani et al. 2023). For instance, Sarang et al. (2021) analyzed French corporations and discovered that firms with a greater percentage of female directors tend to hold more cash, likely as a precaution against liquidity risks. Additionally, these companies showed lower amounts of excess cash, indicating reduced agency risks, possibly due to enhanced oversight by female directors. In contrast, research by Datta et al. (2023) found that U.S. firms led by female executives assign a notably higher market value to their cash reserves compared to those led by male executives. This distinction was attributed to the unique leadership traits of female executives, which improve corporate decision making and boost the perceived worth of the company’s CHs (Ahmed and Hussain 2024).
In the context of China, Yang and Xue (2023) found that boards with proper gender diversity are associated with a higher marginal value of CHs, suggesting that such boards may enhance the strategic management of liquidity. Conversely, a study by Wan Ismail et al. (2022) reported a negative relationship between gender diversity and CHs, noting that this effect diminishes in countries with stronger investor protection. Sector-specific analyses also provide varied insights: Dimitropoulos and Koronios (2021) identified a positive correlation between gender diversity and increased levels of retained cash within the European sports and leisure sector. Similarly, La Rocca et al. (2019) observed that female executives were associated with higher cash reserves, attributed to their generally more risk-averse view and more conservatism in decision making. The study also highlighted that institutional and industry-specific factors can moderate these effects (Ahmed and Hussain 2024).
However, divergent findings have emerged from studies conducted in specific national contexts. In Italy, Cambrea et al. (2020) found that the influence of BGD on the amount of retained cash is contingent upon the positions occupied by female directors. Specifically, female independent directors and chairpersons were associated with lower levels of retained cash, while female CEOs were linked to higher levels of retained cash. Conversely, Atif et al. (2019) observed a markedly negative relationship between gender diversity and CHs in the United States, with a particular emphasis on the role of independent female directors, thereby supporting the critical mass theory. These findings collectively highlight the intricate and context-dependent nature of the relationship between gender diversity and the level of retained cash, indicating that the impact varies significantly according to the regulatory environment and the specific roles of female board members and executives (Ahmed and Hussain 2024).
In summary, despite the mixed results reported in previous studies on the link between gender diversity and the level of retained cash, it is clear that the inclusion of female directors generally enhances board oversight and decision-making processes. This suggests that female board members may impact the management of cash by addressing agency-related issues. Specifically, female directors are likely to mitigate the opportunistic behaviors of managers who have discretionary control, thereby reducing agency problems associated with cash reserves. Consequently, improved oversight, prudent decision making, and more effective monitoring by gender-diverse boards could lead to better management of financial resources, particularly levels of retained cash (Ahmed and Hussain 2024). The current study suggests the following hypothesis:
BGD moderates the relationship between CSR and the level of CHs.
4. Methods and Materials
4.1. Identifying Sample and Sources
Top companies listed on the Egyptian Exchange representing the EGX 100 comprised the original sample chosen for the current study. However, in order to fulfill the study goal of examining the association between CSR and CHs, only firms listed on the S&P/EGX ESG index for a ten-year period, beginning in 2012 and ending at the end of 2021, were included in the sample. Since 2007, the index has exclusively published the top 30 Egyptian companies based on their superior performance in three categories, corporate governance, social responsibility, and the environment, compared to other firms (Metwally et al. 2024). Nonetheless, the researchers managed to obtain information about the top 100 listed businesses that have a strong commitment to CSR. Because of their unique accounting and financial reporting features, insurance and financial companies were disqualified, as were any companies with missing data from not incorporating CSR ratings (Abdelazim et al. 2023; Ali et al. 2024). As detailed in Table 1, the final sample yields 52 firms that make 520 observations from 10 industries. The annual reports, company websites, Bloomberg Asharq, and Mubasher Egypt were the sources of the data used in this study.
4.2. Variable Identification
4.2.1. Dependent Variable
The dependent variable in the present study is the amount of cash held by corporations. Previous work has employed a variety of alternate definitions of the corporate CHs in this context. Therefore, the most used proxy for calculating CHs is utilized in this study to accurately measure the dependent variable “cash holdings” (e.g., Ali et al. 2024; Gao et al. 2013). To be more precise, the percentage of cash and cash equivalents to the total amount of assets was used to calculate the corporate cash holding. This measure, which shows the percentage of cash holdings available to management to the total amount of assets, may be impacted by managerial choices.
4.2.2. Dependent Variable: Corporate Social Responsibility
Previous research has used a variety of methods to quantify corporate social responsibility (CSR), usually integrating CSR with corporate governance (CG). However, Kim et al. (2012) construct their CSR scores without including the CG score, by deducting the CG score from the CSR scores they compute. Mohmed et al. (2020), with a focus on the Egyptian market, investigate the social and environmental aspects of CSR in relation to the Egyptian S&P/ESG index. These CSR dimensions—community, environment, employees, and consumers/products—come from information that is included in the S&P/ESG index, which includes ratings related to social, environmental, and governance issues. Three common dimensions—society, employees, and the environment—are the basis for the CSR measures of several studies, including Bozzolan et al. (2015), and Muttakin and Subramaniam (2015). Thus, we employed the composite score to assess CSR as computed according to the S&P/EGX ESG index, as recommended by Kim et al. (2012) and Mohmed et al. (2020), in proportion to previous readings and for the current study aim.
4.2.3. Moderator Variable
In this study, the moderator variable is gender diversity on corporate boards. Prior studies suggest that this kind of diversity may reduce agency costs and increase the board’s effectiveness. The ratio of women on the board is frequently used as an indicator of BGD (Adams and Ferreira 2009; Ahmed and Hussain 2024; Ali et al. 2024; Faccio et al. 2016).
4.2.4. Control Variables
The research models incorporate a set of control variables that are theoretically associated with corporate cash holdings in order to reduce the likelihood of model misspecification. Based on a thorough analysis of previous research, we discovered that a number of control variables, like board and company characteristics, have an impact on cash holding. The control variables are divided into two major categories by us. Regarding board characteristics, the first group includes CEO duality (CEOD), in which a value of 1 reflects the CEO’s dual role as a chairperson and 0 otherwise; board size (BSIZE), which is computed using the number of directors’ natural logarithm; and the count of board members that are non-executive and independent (BIND) (Ahmed and Hussain 2024; Ali et al. 2024).
Firm-specific characteristics are the second group: One of the most important firms’ variables that may have a big influence on the amount of cash held is firm size (FSIZE). Opler et al. (1999) reported that larger companies had a higher cash holding than smaller ones. Ferreira and Vilela (2004) discovered, however, that there is a negative correlation between firm size and cash holdings. The natural logarithm of total assets of the firm was used to measure this variable. Leverage (LEV): Leverage has a negative impact on cash holdings when debt is appropriately restricted. Leverage and cash holdings are therefore negatively correlated (Ferreira and Vilela 2004). Nonetheless, the hedging argument would be compatible with a positive relationship between LEV and cash holdings (Abuhijleh and Zaid 2023). To assess this variable, we rely on the total-debt-to-total-asset ratio. Net working capital (NWC) management is necessary. NWC can be liquidated in the event of an inadequate cash position, according to Opler et al. (1999). Higher-NWC companies are more likely to store less cash than lower-NWC companies, according to prior empirical studies. After subtracting current liabilities, cash, and cash equivalents from current assets, we divide the remaining amount by firm total assets to determine NWC. Cash flow (CF): According to Bates et al. (2009), firms that have more cash flow also accumulate more cash. This result agrees with that of Almeida et al. (2004); in that sense, cash flow could be measured by dividing profits before interest, dividends, taxes, and depreciation by company total assets.
4.3. The Study Models
The study’s data should be thoroughly analyzed econometrically in order to obtain solid findings about the moderating role of gender diversity and the impact of CSR on the levels of CHs. Our baseline regression methodology is ordinary least squares (OLS). And we use the panel data in order to analyze the dimensions of the cross-section and the time series. We also perform a Hausman test to choose whether to use a fixed effect (RE) model or a random effect (RE) model. The findings, which are not tabulated, support the application of the FE model. It is beneficial to use this model to account for annual variations and reduce the bias caused by omitted variables. To address the issues of heteroscedasticity and autocorrelation, we employ pooled OLS and an FE regression analysis with robust standard errors. The research regression equation is represented as follows:
Model 1:
CHsit = β0 + β1 CSRit + β2 BSIZEit + β3 BINDit + β4 CEODit + β5 FSIZEit + β6 LEVit + β7 NWCit + β8 CFit + βt + βind + εit(1)
Model 2:
CHsit = β0 + β1CSRit + β2 BGDit + β3 CSR * BGDit + β4 BSIZEit + β5 BINDit + β6 CEODit + β7 FSIZEit + β8 LEVit + β9 NWCit + β10 CFit + βt + βind + εit(2)
whereCHs are cash holdings; CSR is corporate social responsibility; board size is BSIZE; the degree of board independence is BIND; the existence of CEO duality is CEOD; FSIZE is the size of the firm; LEV is firm leverage; NWC is net working capital; CF is cash flow; BGD is board gender diversity; CSR*BGD is the interaction of CSR with board gender diversity; and βt and βind represent the time and industry-fixed effects. Table 2 describes all variables.
5. Empirical Results
5.1. Descriptive Statistics
Table 3 displays a descriptive analysis for every variable tested in the study. The data demonstrated in the table indicate that the non-financial Egyptian listed firms have cash and cash equivalents equivalent to around 11% of their total assets, which is the mean value of CHs of 11%. With an S.D of 0.073 and a median score of 4.815, CSR’s average score was 4.817. In our sample, a CSR score of 4.62 was the minimum and 5.07 was the maximum. In our sample, the average ratio of women directors on the boards is 9.5%. When it comes to board characteristics, the range for BSIZE is 1.39 to 2.38, with a mean of 2.12. There were between 1 and 15 non-executive directors, with a mean of 6.69. Furthermore, we can see that Egyptian enterprises exhibit 53.3% CEO dualism according to the mean of CEOD, which is equal to 277 observations from the final sample (520 × 53.3%). Descriptive statistics related to firm-specific characteristics reveal that the average company size was 20.48, with an S.D of 1.73, and a range of 20.75 to 25.37. And with an SD of 0.235, the average LEV is 41.8%. Moreover, CF ranges from −0.35 min to 0.38, with an average of 0.033, according to the data. The data also show that the average of NWC is 0.143.
5.2. Correlation Analysis
The correlation matrices’ findings are displayed in Table 4, which demonstrates the lack of multicollinearity and the low degree of correlation between the independent variables. The variance inflation factor (VIF) provides more confirmation of this. The total mean value is 1.85, and the VIF for each variable is less than 5.00. Also, at a significant level of less than 1%, the outcomes indicate a positive relationship between CSR, BGD, NWC, and CF and CHs, with corresponding Pearson’s correlation values of 0.135, 0.261, 0.320, and 0.248. Nonetheless, at a substantial level of less than 1%, CHs and CEOD show a significant and negative correlation (Pearson’s correlation coefficient = −0.197). Moreover, there is a negative insignificant correlation between CHs and FSIZE, BIND, LEV, and BSIZE.
6. Multivariate Results
6.1. CSR and CHs (Model 1)
The outcomes of the cash holding study, which tested the association between CSR and CHs (H1) using pooled OLS and FE models, are displayed in Table 5. The adj. R2 for the pooled OLS model is 22.1%, whereas the adj. R2 for the fixed effects model is 18.2%. This percentage shows that the study’s explanatory variables are able to account for around 22.1% and 18.2% of the changes in the company cash holdings in both the OLS and FE models. In support of H1, we discovered that the CSR coefficient in both models is statistically significant and positive at the 1% level (B = 0.476, 0.522). The agency theory framework and the expenses related to CSR activity are supported by this finding. As a result, these agency costs lead to a rise in management opportunism, which is expressed in their cash holding behavior. Our results are consistent with the research of Jadiyappa et al. (2021); Lu et al. (2017); Nasr et al. (2020); and Yin and Yang (2023).
For the control variables, CHs have a significant positive association with net working capital, cash flow, and board size (BSIZE) (Ahmed and Hussain 2024; Nasr et al. 2020). Moreover, the results show a negative and significant association between the amounts of corporate cash holdings and board independence and CEO duality (Abuhijleh and Zaid 2023). We also note that the factors related to leverage and company size are not significant.
6.2. CSR, Gender Diversity, and CHs (Model 2)
We investigated whether the association between CSR and CHs is impacted by the ratio of women directors on the board (H2). Table 6’s statistical results demonstrate that, in both models (pooled OLS, FE) (B = 0.607, 0.465), BGD on its own has a significant positive impact on CHs at the 1% level. This is in line with research from developing countries (Zeng and Wang 2015; Nadia and Hanafi 2023), where women on boards typically have prudential reasons for cash holding policies. Nonetheless, at the 10% level in the pooled OLS model and the 5% level in the FE model, we discovered an important negative impact of the interaction of CSR*BGD on the relationship between the CSR and CHs. From this angle, the inclusion of female directors on the board has the ability to change the initial association’s direction from positive to negative, indicating that the association between CSR and CHs is negatively impacted by the existence of women on the board, which supports hypothesis H2. Figure 1 illustrates how the inclusion of gender diversity weakened the association between CSR and CHs. The Y-axis in Figure 1 represents levels of retained cash, while the X-axis shows values for low and high levels of CSR. A line in the middle represents the impact of CSR on cash holding levels at high gender diversity, whereas another line (dashed) represents the effect at low gender diversity, where the association between CSR and CHs is stronger when gender diversity decreases, as the line is steeper at low gender diversity than it is at high gender diversity.
As the number of women on the board rises, the results imply that the positive link between CSR and CHs becomes inverse. This shift is probably due to the possibility that female directors would examine corporate social responsibility programs more closely and see them as possible tools for managerial opportunism. This is where managers might justify large financial reserves or utilize CSR to improve their reputation. According to Adams and Ferreira (2009), there is a lower chance that managers would use business actions, such as CSR efforts, as an excuse for big, needless cash holdings because women on boards typically keep a tight eye on these activities. Cash management techniques change when more women are appointed to boards. The emphasis shifts to more efficient cash use rather than building up extra cash reserves. Female directors contribute to more effective cash use by lowering extra cash that managers may hold onto for ambiguous or self-serving reasons, according to Nasr et al. (2020) and Marie et al. (2024). A critical role for female directors in reducing the association between CSR and cash holding is suggested by the negative interaction between CSR and gender diversity. Because of their scrutiny, managers are less likely to hold large amounts of cash for opportunistic purposes, resulting in more efficient use of company resources.
This finding that supports that having a diverse range of gender representation on the board stops managers from acting opportunistically and taking advantage of their huge financial reserves is supported by this research. Therefore, gender diversity reduces managers’ ability to leverage financial resources into personal gains, which therefore has the potential to exercise significant control over CSR initiatives and adversely affect cash reserve retention. According to these findings, women nominated to board positions are probably going to keep an eye on how managers are managing stakeholders’ interests through the opportunistic use of CSR initiatives. To protect stakeholders’ interests, managers behave as stewards and are less prone to hoarding large amounts of cash. Diversity in the genders on the board is therefore viewed as a beneficial corporate governance tool that will probably monitor management choices made through CSR initiatives. Our findings align with those of Nasr et al. (2020) and Marie et al. (2024).
6.3. Robustness Analysis
In order to ensure the stability and dependability of our empirical findings, we have carried out two robustness tests.
6.3.1. An Alternate Proxy of CHs
In accordance with previous studies (Banjade and Diltz 2022; Habib and Hasan 2017), a different way to measure cash holdings was used to re-estimate the analysis: the natural log of one plus the percentage of cash and cash equivalents to total assets (LnCHs). The results displayed in Table 7 indicate that the outcomes of Models 1 and 2 were consistent with the earlier discoveries.
6.3.2. Endogeneity Issue
Two-Step System GMM
For dynamic panel data, we apply the two-step system generalized method of moments (GMM) to confirm the validity of our results and address possible endogeneity issues. By using this approach, endogeneity issues between our company’s cash holdings and other unobserved firm characteristics are attempted to be avoided or minimized (Ahmed and Hussain 2024; Ali et al. 2024). Additionally, the GMM approach can manage heteroscedasticity and autocorrelation problems. It also uses previous values of the dependent variable (cash holdings) as useful tools to address the possibility of simultaneous and dynamic endogeneity.
Table 8 demonstrates that in every model, for the AR (2) Arellano–Bond serial correlation tests, the p-values are more than 0.05. The lack of serial correlation in the error terms is therefore indicated by the satisfaction of the Arellano–Bond autocorrelation tests. Furthermore, the validation of over-identifying limitations in the GMM model is required by the Hansen J test. The results of the Hansen test determine if the instrumental variables are sound. In every model, the Hansen statistics’ p-values are more than 0.05. These tests’ results indicate that the GMM estimator’s instruments are exogenous. Additionally, they show that the model has no serial correlation, or autocorrelation, which supports the applicability of the GMM estimator. Therefore, Table 8’s results agree with the main findings, suggesting that endogeneity-related problems are unlikely to cause confusion for our results—that is, they are less susceptible to endogeneity.
Two-Stage Least Squares (2SLS) Model
In keeping with earlier research by Yeh et al. (2020) and Yin and Yang (2023), we use the 2SLS regression and the industry mean CSR score as an instrument for the CSR score in order to further solve the causative link between CSR and cash holdings. The first-stage regression findings are displayed in Column (1) of Table 9, where the instrumental variable’s coefficient on CSR scores is significantly positive at the 1% significance level. This suggests a significant relationship between the instrument and the endogenous variable. Furthermore, the weak instrumental variable test findings reveal that the F-statistic is 158.5, which is considerably greater than the critical value at the 5% significance level, suggesting that our instrumental variable is valid and neither weakly nor under-identified.
Table 9’s Columns 2 and 3 present the findings of the second stage of regression, which involved regressing the first-stage regression’s predicted value of the CSR score on cash holdings. According to the results, the 2SLS findings are on par with the ones that were given, indicating that our findings are not boosted by endogeneity concerns.
7. Conclusions, Limitations, and Future Research
By using a sample of 52 Egyptian non-financial institutions listed on the EGX with 520 observations covering the period from 2012 to 2021, this research investigates the association between CSR and CHs, while also exploring the board gender diversity moderating effect on this association.
7.1. Theoretical Contributions
The findings of this study demonstrated a positive significant association between CSR and levels of cash holding. Further, gender diversity on a board is discovered to have a negative moderating role as it weakens the association between CSR and CHs. This outcome confirms the earlier findings of some early studies (Al-Najjar and Clark 2017; Arouri and Pijourlet 2017; Chan et al. 2022; Jadiyappa et al. 2021; Lu et al. 2017; Nasr et al. 2020; Tsendsuren et al. 2021; Xue 2023; Yang and Susanto 2021; Yin and Yang 2023) in their findings that CSR practices are an opportunity to hide the true financial reporting of the company toward their stockholders and retain more CHs.
These findings to the best of our knowledge represent novel findings, as the current study represents one of the early studies that investigates the moderating impacts of gender diversity on the association between CSR practices and CHs in an emerging market in general and Egypt specifically. Gender diversity impact on the level of retained cash was studied in the literature by many studies as a direct relationship (Ahmed and Hussain 2024; Elamer and Utham 2024; Hu et al. 2023; Nadia and Hanafi 2023; Yang and Xue 2023), except for Nasr et al. (2020), who studied the moderating impact of gender diversity on the association between CSR and CHs in the Frensh context. In that sense, the current study extends the literature by examining the moderating role of gender diversity in an unexplored context, namely Egypt as one of the LDCs.
7.2. Practical Implications
This study presents key implications for Egyptian corporations and their management, investors, and regulatory bodies. Based on the results, it is recommended that shareholders increase their engagement with corporate governance to ensure management actions are aligned with their interests. Additionally, the study highlights the necessity of implementing robust internal controls, which can reduce cash holdings and enhance cash management policies in Egyptian corporations. It is further advised that companies should pursue CSR initiatives with a genuine focus on sustainability, rather than using CSR as a strategy to mask weaknesses in financial reporting transparency and to hide cash management policies. Further, through understanding and applying these findings, managers have the ability to promote improved corporate governance, maximize the use of funds, and guarantee that CSR endeavors are genuine and in line with the company’s strategic goals. Embracing gender diversity on the board is not just a matter of representation but a tool for improving financial discipline and reducing risks of opportunism in resource management.
For investors, both domestic and international, the findings suggest that investment decisions should be informed by a deeper examination of a company’s CSR activities, beyond what is disclosed in annual reports and CSR statements. In particular, investors should be cautious when considering firms with extensive CSR engagement, as high CSR disclosure may sometimes serve as a distraction from inadequate financial transparency. Moreover, investors are advised to invest in companies that have gender diversity as female representation on a board was found to be useful in rational decision making, and to maintain balanced cash management policies.
The study also stressed the need for enhanced legislative measures that safeguard investor rights, which could contribute to making the Egyptian market more attractive to foreign capital. Strengthening investor protections would foster a more transparent and stable market, encouraging further investment. Therefore, regulators and policymakers are advised to continue following up with the implementation of a percentage of women in all Egyptian listed companies’ board membership as diversity on the board was found to enhance decision making and reduce the managerial opportunistic behavior.
This research lays a foundation for future investigations. Expanding the scope to include financial institutions listed on the EGX, and analyzing their CSR activities in connection with cash holdings, could yield additional insights. Comparative studies across different industries within the EGX, as well as analyses that incorporate listed companies from other countries, would enhance the empirical basis of the findings. Moreover, exploring additional variables, such as political ties, could provide a more comprehensive understanding of how CSR engagement intersects with broader corporate practices, including cash management.
Finally, the present study primarily focuses on BGD as a key corporate governance mechanism. However, the revised Egyptian corporate governance code introduces several updates that warrant further investigation. Future research could extend its scope to examine additional governance mechanisms, including board composition, board size, the frequency of board meetings, and the roles of family and foreign ownership. These elements are likely to offer deeper insights into their respective impacts on corporate decision making, transparency, and overall cash policies in the Egyptian market. Such an investigation would provide a more detailed perspective on how governance structures can enhance the effectiveness of CSR practices in promoting transparency and accountability within firms.
7.3. Research Limitations
Even though this study makes a valuable contribution to the literature, it is important to recognize certain limitations. First, the analysis is restricted to non-financial companies listed on the Egyptian Exchange (EGX) between 2012 and 2021. Future research could extend this work by examining other African contexts, particularly in the MENA region, where there is a notable scarcity of studies addressing cash holdings and corporate cash management practices. This is particularly relevant as several countries in the region have experienced significant political and economic disruptions, such as those associated with the Arab Spring. Second, the study’s focus on non-financial firms limits its generalizability. The exclusion of non-financial listed firms means that the findings may not fully capture the broader corporate landscape in Egypt, where CSR reporting is not uniformly practiced across different sectors. Future research could include listed financial institutions to provide a more comprehensive understanding of CSR practices and their impact on corporate cash holdings.
Conceptualization, A.B.M.M., S.A.S.A. and M.A.S.A.; methodology, A.B.M.M., S.A.S.A. and M.A.S.A.; software, A.B.M.M., S.A.S.A. and M.A.S.A.; validation, A.B.M.M., S.A.S.A. and M.A.S.A.; analysis and interpretation of the data, A.B.M.M., S.A.S.A. and M.A.S.A.; drafting of the paper, A.B.M.M., S.A.S.A. and M.A.S.A.; critical revision for intellectual content, A.B.M.M., S.A.S.A. and M.A.S.A.; funding acquisition, A.B.M.M. and M.A.S.A. All authors have read and agreed to the published version of the manuscript.
Not applicable.
Data is available upon request to researchers who meet the eligibility criteria. The corresponding author is to be contacted privately through e-mail.
The authors declare no conflicts of interest.
Footnotes
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Industry Type and Sample Classification.
| Industry | Companies | Observations | % |
|---|---|---|---|
| Food, Beverage, and Tobacco | 10 | 100 | 19.2 |
| Industrial Goods, Services, and Automobiles | 8 | 80 | 15.4 |
| Building Materials | 5 | 50 | 9.6 |
| Basic Resources | 3 | 30 | 5.8 |
| Real Estate | 12 | 120 | 23 |
| Textiles and Durables | 4 | 40 | 7.7 |
| Shipping and Transportation Services | 5 | 50 | 9.6 |
| Health Care and Pharmaceuticals | 3 | 30 | 5.8 |
| Energy and Support Services | 2 | 20 | 3.9 |
| Total | 52 | 520 | 100% |
Variable definitions.
| Variables | Definition |
|---|---|
| Dependent Variable | |
| Cash Holdings (CHs) | Cash and cash equivalents ÷ the total amount of assets. |
| Independent Variables | |
| Corporate Social Responsibility (CSR) | The natural log of four categories (community, environment, employees, and consumer and product) as determined by the Egyptian ESG index. |
| Moderating Variable | |
| Board Gender Diversity (BGD) | The percentage of women directors on the board. |
| Governance Variables | |
| Board Size (BSIZE) | The natural logarithm of the total number of board members. |
| Board Independence (BIND) | The number of independent non-executive directors on the board. |
| CEO Duality (CEOD) | A dummy variable that has value 1 if the chairperson and the CEO are the same person; otherwise, it has value 0. |
| Firm-Specific Variables | |
| Firm Size (FSIZE) | The natural logarithm of the firm’s total assets. |
| Leverage (LEV) | Total debt ÷ the total amount of assets. |
| Net Working Capital (NWC) | Current liabilities add to cash and cash equivalents, then subtracting from current assets, and then dividing the outcome by firm total assets. |
| Cash Flow (CF) | Profits before interest, dividends, taxes, and depreciation ÷ the firm’s total amount of assets. |
Descriptive statistics.
| Variables | N | Mean | Median | SD | Min | Max |
|---|---|---|---|---|---|---|
| CHs | 520 | 0.110 | 0.042 | 0.242 | −0.250 | 1.530 |
| CSR | 520 | 4.817 | 4.815 | 0.073 | 4.622 | 5.077 |
| BGD | 520 | 0.095 | 0.043 | 0.123 | 0.000 | 0.506 |
| BSIZE | 520 | 2.124 | 2.205 | 0.325 | 1.396 | 2.837 |
| BIND | 520 | 6.692 | 7.000 | 2.620 | 1.000 | 15.000 |
| CEOD | 520 | 0.533 | 0.000 | 0.501 | 0.000 | 1.000 |
| FSIZE | 520 | 21.476 | 21.628 | 1.730 | 20.750 | 25.374 |
| LEV | 520 | 0.418 | 0.386 | 0.235 | 0.001 | 0.933 |
| NWC | 520 | 0.143 | 0.119 | 0.280 | −0.819 | 0.992 |
| CF | 520 | 0.033 | 0.035 | 0.087 | −0.350 | 0.380 |
Correlation Matrix.
| Variables | CHs | CSR | BGD | BSIZE | BIND | CEOD | FSIZE | LEV | NWC | CF | VIF |
|---|---|---|---|---|---|---|---|---|---|---|---|
| CHs | 1.00 | ---- | |||||||||
| CSR | 0.135 *** | 1.00 | 1.15 | ||||||||
| BGD | 0.261 *** | 0.031 | 1.00 | 1.19 | |||||||
| BSIZE | −0.042 | −0.008 | 0.286 *** | 1.00 | 4.35 | ||||||
| BIND | −0.063 | −0.076 * | 0.297 *** | 0.670 *** | 1.00 | 4.39 | |||||
| CEOD | −0.197 *** | −0.037 | 0.126 *** | 0.043 | 0.002 | 1.00 | 1.06 | ||||
| FSIZE | −0.031 | 0.303 *** | −0.116 ** | −0.096 ** | −0.063 | 0.003 | 1.00 | 1.30 | |||
| LEV | −0.028 | 0.058 | 0.027 | −0.024 | 0.007 | −0.108 | 0.340 *** | 1.00 | 1.16 | ||
| NWC | 0.320 *** | −0.029 | 0.038 | −0.084 * | −0.061 | 0.069 | 0.022 | −0.050 | 1.00 | 1.03 | |
| CF | 0.248 *** | 0.026 | 0.171 *** | 0.070 | 0.034 | −0.076 * | −0.063 | −0.013 | 0.059 | 1.00 | 1.05 |
| Mean VIF | 1.85 | ||||||||||
*** p < 0.01, ** p < 0.05, and * p < 0.10 indicate significant correlations.
Regressions of CSR and CHs—Model 1.
| Variables | Pooled OLS | Fixed Effects (FEs) | ||
|---|---|---|---|---|
| Coef. | Z | Coef. | Z | |
| CSR | 0.476 | 3.182 *** | 0.522 | 2.753 *** |
| BSIZE | 0.036 | 0.594 | 0.127 | 1.706 * |
| BIND | −0.008 | −1.043 | −0.031 | −3.135 *** |
| CEOD | −0.097 | −5.094 *** | −0.104 | -4.792 *** |
| FSIZE | −0.009 | −1.445 | −0.011 | −0.507 |
| LEV | −0.017 | −0.386 | −0.021 | −0.352 |
| NWC | 0.281 | 8.245 *** | 0.199 | 5.342 *** |
| CF | 0.569 | 5.192 *** | 0.268 | 2.725 *** |
| Cons | −2.019 | −3.222 *** | −2.211 | −2.334 ** |
| Year FE | Included | |||
| Industry FE | Included | |||
| Adjusted R2 | 0.221 | 0.182 | ||
| F-value | 18.065 *** | 12.714 *** | ||
| Observation | 520 | 520 | ||
Notes: Significance is indicated at 1, 5, and 10% levels, respectively, by ***, **, and *.
Regressions of BGD, CSR, and CHs—Model 2.
| Variables | Pooled OLS | Fixed Effects (FEs) | ||
|---|---|---|---|---|
| Coef. | Z | Coef. | Z | |
| CSR | 0.379 | 2.882 *** | 0.470 | 2.537 ** |
| BGD | 0.607 | 7.101 *** | 0.465 | 4.242 *** |
| CSR*BGD | −1.740 | −1.954 * | −2.926 | −2.325 ** |
| BSIZE | 0.021 | 0.347 | 0.057 | 0.765 |
| BIND | −0.013 | −1.932 * | −0.026 | −2.612 *** |
| CEOD | −0.121 | −6.483 *** | −0.130 | −5.913 *** |
| FSIZE | −0.003 | −0.458 | −0.015 | −0.672 |
| LEV | −0.048 | −1.164 | −0.007 | −0.125 |
| NWC | 0.272 | 8.335 *** | 0.218 | 5.902 *** |
| CF | 0.462 | 4.317 *** | 0.234 | 2.417 ** |
| Cons | −1.633 | −2.715 | −1.801 | −1.932 * |
| Year FE | Included | |||
| Industry FE | Included | |||
| Adjusted R2 | 0.277 | 0.221 | ||
| F-value | 20.923 *** | 12.976 *** | ||
| Observation | 520 | 520 | ||
Notes: ***, **, and * reflect significance at 1, 5, and 10% levels, respectively.
Findings of alternate proxy of CASH.
| Variables | Model 1 (LnCHs) | Model 2 (LnCHs) | ||||||
|---|---|---|---|---|---|---|---|---|
| Pooled OLS | (FE) | Pooled OLS | (FE) | |||||
| Coef. | Z | Coef. | Z | Coef. | Z | Coef. | Z | |
| CSR | 0.358 | 3.815 *** | 0.303 | 2.365 ** | 0.296 | 3.264 *** | 0.265 | 2.135 ** |
| BGD | ---- | ---- | ---- | ---- | 0.397 | 6.723 *** | 0.327 | 4.445 *** |
| CSR*BGD | ---- | ---- | ---- | ---- | −0.805 | −2.011 ** | −2.103 | −2.486 ** |
| BSIZE | 0.007 | 0.178 | 0.073 | 1.443 | −0.001 | −0.036 | 0.023 | 0.0462 |
| BIND | −0.005 | −0.905 | −0.019 | −2.942 *** | −0.008 | −1.765 * | −0.016 | −2.413 ** |
| CEOD | −0.066 | −4.982 *** | −0.078 | −5.361 *** | −0.081 | −6.234 *** | −0.096 | −6.553 *** |
| FSIZE | −0.006 | −1.426 | −0.007 | −0.473 | −0.002 | −0.496 | −0.009 | −0.655 |
| LEV | −0.018 | −0.624 | −0.008 | −0.236 | −0.038 | −1.335 | −0.002 | −0.026 |
| NWC | 0.205 | 8.692 *** | 0.137 | 5.468 *** | 0.197 | 8.742 *** | 0.150 | 6.075 *** |
| CF | 0.453 | 6.001 *** | 0.227 | 3.422 *** | 0.378 | 5.126 *** | 0.203 | 3.115 *** |
| Cons | −1.498 | −3.472 *** | −1.225 | −1.925 * | −1.255 | −3.012 *** | −0.934 | −1.495 |
| Year FE | Included | |||||||
| Industry FE | Included | |||||||
| Adjusted R2 | 0.234 | 0.197 | 0.293 | 0.240 | ||||
| F-value | 20.786 *** | 14.157 *** | 22.556 *** | 14.506 *** | ||||
| Observation | 520 | 520 | 520 | 520 | ||||
Notes: Significance is indicated at 1, 5, and 10% levels, respectively, by ***, **, and *.
Findings of GMM method.
| Variables | Model 1 (CHs) | Model 2 (CHs) | ||
|---|---|---|---|---|
| Coef. | Z | Coef. | Z | |
| CHst−1 | 0.519 | 8.614 *** | 0.482 | 8.475 *** |
| CSR | 0.224 | 2.095 ** | 0.240 | 2.135 ** |
| BGD | ---- | ---- | 0.106 | 1.895 * |
| CSR*BGD | ---- | ---- | −2.705 | −2.298 ** |
| BSIZE | 0.113 | 1.372 | 0.153 | 1.385 |
| BIND | −0.011 | −1.283 | −0.018 | −1.245 |
| CEOD | −0.062 | −2.435 ** | −0.059 | −1.289 |
| FSIZE | −0.004 | −0.578 | −0.002 | −0.268 |
| LEV | −0.028 | −0.519 | −0.003 | −0.045 |
| NWC | 0.127 | 2.249 ** | 0.158 | 2.418 ** |
| CF | 0.185 | 1.778 * | 0.235 | 1.789 * |
| Cons | −0.061 | −0.059 | −0.396 | −1.297 |
| Year FE | Included | |||
| Industry FE | Included | |||
| F-value | 207.839 *** | 296.307 *** | ||
| Observation | 520 | 520 | ||
| AR2 (p-value) | 0.276 | 0.322 | ||
| Hansen test (p-value) | 0.443 | 0.565 | ||
Notes: Significance is indicated at 1, 5, and 10% levels, respectively, by ***, **, and *.
Findings of 2SLS method.
| Variables | Column 1 | Column 2 | Column 3 | |||
|---|---|---|---|---|---|---|
| Coef. | Z | Coef. | Z | Coef. | Z | |
| CSR_ind | 0.792 | 12.593 *** | ---- | ---- | ---- | ---- |
| CSR | ---- | ---- | 0.233 | 2.201 ** | 0.253 | 2.560 ** |
| BGD | ---- | ---- | ---- | ---- | 0.586 | 6.802 *** |
| CSR*BGD | ---- | ---- | ---- | ---- | −3.974 | −2.265 ** |
| BSIZE | 0.038 | 2.165 ** | 0.062 | 0.927 | 0.022 | 0.354 |
| BIND | −0.005 | −2.364 ** | −0.011 | −1.372 | −0.015 | −2.025 ** |
| CEOD | −0.012 | −1.792 * | −0.101 | −5.143 *** | −0.125 | −6.623 *** |
| FSIZE | 0.016 | 9.594 *** | −0.004 | −0.569 | −0.005 | −0.974 |
| LEV | −0.043 | −3.521 *** | −0.022 | −0.517 | −0.058 | −1.381 |
| NWC | −0.11 | −1.076 | 0.279 | 8.054 *** | 0.266 | 8.101 *** |
| CF | 0.044 | 1.275 | 0.582 | 5.214 *** | 0.472 | 4.356 *** |
| Cons | −0.367 | −0.945 | −0.494 | −0.399 | −0.141 | −0.783 |
| Adjusted R2 | 0.330 | 0.203 | 0.284 | |||
| F-value | 31.485 *** | 16.190 *** | 20.187 *** | |||
Notes: Significance is indicated at 1, 5, and 10% levels, respectively, by ***, **, and *.
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; Saleh Aly Saleh Aly 2 ; Mohamed Ali Shabeeb Ali 3
1 Department of Accounting, College of Business Administration, King Faisal University, Al-Ahsa 31982, Saudi Arabia; Department of Accounting, Faculty of Commerce, Assiut University, Assiut 71515, Egypt
2 Department of Accounting, Faculty of Commerce, Beni Suef University, Beni Suef 62511, Egypt
3 Department of Accounting, College of Business Administration, King Faisal University, Al-Ahsa 31982, Saudi Arabia; Accounting Department, Faculty of Commerce, South Valley University, Qena 83523, Egypt