Page 20 - SUSTAINABILITY ISSUES & COVID-19

02 The Effect of Female CFO to
Indonesian Firm Value:

The Role of the Firm Cash Holding

Yuni Asih, Ancella Anitawati Hermawan

Abstract: Company in Indonesia now mostly have female Director in the board and most of CFO position in Indonesia
is currently occupied by Female. Those break the glass ceiling term in the business for woman. This study aims to
examine the effect of female CFO on the firm value. In addition, this study will also examine whether that association is
influenced by the firm cash holding policy. Hypothesis testing is conducted by using data panel fixed effect and random
effect regression analysis, with of 341 companies in the non-financial sector listed on the Indonesia Stock Exchange in
2014 to 2018. The results of the study shows that female CFO has a negative association with the firm value. This
finding confirms that female gender may have the tendency to be more cautious, risk averse, less confidence, and less
competitive in investment decision making, so it will reduce the future company performance and investor investment
returns. Nevertheless, firms with higher cash holdings will have weaker negative association between female CFO
and firm value. This finding indicates that high cash holding perceived to give liquidity increase and lower cost of
financing, dividend distribution, and stronger survival potential in crisis period. This study gives an additional insight
that gender characteristics matter in policy making related to company financial strategies and should be considered
when choosing a CFO in the company to maximize firm value.

Keywords: female CFO, cash holding, firm value.

1. INTRODUCTION
Management consist of people with multiple background and characteristic, one of the determinant that influence
policy and strategic decision is director gender. Gender gives different characteristics to men and women in establishing
strategies and responding external factors in the business environment.

Brinkhuis and Scholtens (2018) found that investors do not value differently to the appointment of CEO / CFOs for
women and men. Because from an investor’s perspective, there are no business issues related to certain gender in
the appointment of CEO / CFO. Investors are more concerned about the company’s financial performance, and if the
appointment of female directors worsens financial performance, it will reduce the value of the company.

Several studies have found the influence of female executives on company performance. The market shows a positive
reaction in the short term to the appointment of female directors (Campbell and Vera, 2010). The representation of
women on the committee will have a positive effect on company performance (Green and Homroy, 2018). Women’s
institutional directors have incentives to engage in corporate governance and have a positive influence on corporate
value (Martinez, Bel-Oms, and Sempere, 2018). The presence of women in the board of directors has a positive effect
on ethical performance and compliance with ethics and social issues, thus giving a positive effect on company value
(Isideo and Sobral, 2015). Ullah, Fang, and Jebran (2020) also found that female directors on the board of directors
had a positive effect on company value. Women’s directors are considered to improve management discipline, reduce
agency conflicts, and improve corporate governance so as to increase company value.

In contrast, other studies have shown women’s representation in the board of directors can worsen company
performance. Female directors can improve company performance, but only to a certain point, then reduce the value of
the company (Martinez, Oms, and Sempere, 2016). Women’s representation on the board, audit committee, CFO / CEO
leads to more conservative reporting, higher levels of social and environmental disclosure, lack of tax aggressiveness
and higher audit fees (Khlif and Achek, 2017). Companies owned by women tend to have lower success rates than
those owned by men, this is because women use less working capital, less labor, and fewer hours of work and have
preferences for different business goals, which influence on company performance (Fairlie and Robb, 2009).

International Conference on Sustainability 19
(5 Sustainability Practitioner Conference)
Th