Board Characteristics and Corporate Cash Flow Risk: Evidence from an Emerging Market

This study explores how board characteristics impact corporate cash flow risk in an emerging market setting. While previous research has examined firm risk, crash risk, and earnings quality, there is limited evidence on cash flow risk and its governance factors, especially in developing economies. To fill this gap, this study differentiates between volatility-based and distortion-based measures of cash flow risk and assesses how board attributes influence these aspects. Using a balanced panel of 327 non-financial firms listed in Vietnam from 2013 to 2023, cash flow risk is measured by the rolling five-year volatility of operating cash flows and short-term distortions shown in earnings–cash flow mismatches. To address endogeneity and dynamic persistence, the analysis uses the system generalized method of moments estimator, along with fixed-effects and feasible generalized least squares models for robustness. The findings suggest that board independence, gender diversity, and financial expertise are linked to lower cash flow risk, highlighting the importance of effective monitoring. Conversely, board meeting frequency is positively linked to risk, suggesting that boards tend to increase meeting frequency as a reactive response to heightened uncertainty. Board size and CEO duality do not show consistent effects. Focusing on Vietnam’s institutional context, this study provides evidence that governance mechanisms influence different dimensions of cash flow risk through separate channels, offering valuable insights for enhancing board effectiveness in emerging markets.