Directors with foreign experience and corporate cash holdings

This study examines the impact of directors with foreign experience (FE directors) on corporate cash holdings. Using a sample of Chinese listed firms, we find that directors with the experience of working or studying abroad have a positive and significant impact on corporate cash decisions, supporting the precautionary motive. The result is valid across a set of robustness tests and several endogeneity checks. Moreover, we find that the association between FE directors and cash holdings is more pronounced in firms with greater financial constraints and investment opportunities. The mediation analysis further identifies two potential channels through which FE directors increase cash holdings, that is, facilitating foreign operations and promoting risky innovation. We finally perform a series of additional analyses to further validate our findings. Overall, our study reveals that it is the resource-providing role that such directors play to shape cash policy, which sheds new light on the value of international human capital for firms in emerging markets.