Board diversity and working capital management strategies: evidence from energy sector of Pakistan
Journal of Economic and Administrative Sciences
ISSN: 2054-6238
Article publication date: 1 February 2022
Issue publication date: 12 August 2024
Abstract
Purpose
This study investigates the mediating role of working capital management (WCM) efficiency between board diversity (based on gender and financial knowledge) and firm performance. The study further examines which WCM approach (conservative, moderate, and aggressive) they employ to increase (decrease) firm performance.
Design/methodology/approach
The study employs listed energy firms of Pakistan over the period 2010 to 2019. The system generalized method of moments estimator and logit model are utilized to estimate the underlying relationships.
Findings
The results show that WCM efficiency partially mediates the relationship between board financial expertise (BFE) and firm performance. Nonetheless, the presence of female directors is merely symbolic until they reach a certain level as only the quadratic term of board gender diversity (BGD) has a significant effect on firm performance. Female directors do not influence WCM efficiency. The results also demonstrate that BGD encourages a conservative WCM approach, while BFE encourages a moderate WCM approach. Furthermore, both conservative and moderate WCM approaches are significantly associated with firm performance.
Practical implications
The findings hold implications for increasing the representation of women and financial experts on board to improve the capital structure decisions of the energy firms in Pakistan.
Originality/value
This study is the first attempt to explore the mediating role of WCM efficiency between board diversity and firm performance. To the best of the authors' knowledge, no previous study has investigated the effect of BGD and BFE on different WCM approaches distinctly.
Keywords
Acknowledgements
The authors thank the editors (Dr. Ghulam A Arain and Dr Rebecca Abraham), co-editors, and two anonymous reviewers for their constructive comments.
Citation
Khan, A.N., Yahya, F. and Waqas, M. (2024), "Board diversity and working capital management strategies: evidence from energy sector of Pakistan", Journal of Economic and Administrative Sciences, Vol. 40 No. 3, pp. 658-672. https://doi.org/10.1108/JEAS-09-2021-0183
Publisher
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited