BOHR International Journal of Business Ethics and Corporate Governance

2022, Vol. 1, No. 1, pp. 76–85

https://doi.org/10.54646/bijbecg.011
www.bohrpub.com

An Empirical Analysis on the Relationship Between Multiple

Directorships and Cash Holding: A Study on the Financial Sector
2019–2020 in Oman
Maather Mohammed Al-Alawi1 , Duaa Suleiman Al Hoqani1 and Essia Ries Ahemed2,∗
1 Collegeof Economics, Management and Information Systems, University of Nizwa, Nizwa, Oman
2 Facultyof Business, Karabuk University, Karabük, Turkey
∗ Corresponding author: [email protected]

Abstract. The aim of this study was to determine the link between multiple directorships (MDs) and cash holdings.
This study used the source from the firm’s annual report, as these studies were secondary data. SmartPLS 3.0 was
used to verify the secondary data collected. This study shows that the number of people holding MDs inside the
institution is growing, and this has a great effect on the organization’s interests. In addition, the findings support
the first theory, which promotes chief executive officers to hold varied directorships because they contain desired
elements from the companies. This study is unique because it is the first in the Sultanate of Oman to investigate
financial enterprise at the Muscat Stock Exchange with the goal of achieving certainty. It evaluates whether having
executives with one or numerous directorships is advantageous for the organization and its stakeholders.
Keywords: Multiple directorships, Cash holding, Financial Sector, Oman.

INTRODUCTION value of the company by sharing their extensive experience

in their field of work and the relationships they have
The director’s board is an important factor in a company’s outside the organization. This can be leveraged to the
internal control systems (Ahmed, Alabdullah, Shaharudin organization’s benefit and improve its reputation (Saleh,
& Putri, 2020). Control internal tools have helped to solve Shurafa, Shukeri, Nour and Maigosh, 2020). In addition,
some critical issues and issues related to laws, declining they may provide better advice and better monitoring. On
and regulation growth, and related issues to manage the the contrary, the other theory states that directors who
internal risks through chasing to reach a favorable effect of hold several board positions are too preoccupied to fulfill
organizations’ outcome (Alabdullah, Ahmed & Muneerali, their responsibilities or provide significant value to the
2019; Alabdullah, Ahmed & Nor, 2019; Ahmed, Alabdul- organization. They will not work appropriately or success-
lah, Shaharudin & Putri, 2020). Hence, control internal fully due to work pressures and poor communication with
tools have been utilized by high level of administration employees. This study will be unique because no research
to have a correct level of transparency and efficiency in has been done to examine companies registered on the
their organizations for the purpose of improving and pro- Muscat Stock Exchange (MSX) in order to demonstrate the
moting the organizations’ growth (Alsarmi, & Ahemed, benefits of the system and the conditions used for MDs,
2022; Alabdullah, Laadjal, Ahmed & Al-Asadi, 2018). as well as whether there is any relationship that could
Scholars have universally acknowledged that multiple have a negative or positive impact on monetary assets.
directorships (MDs) play an important role in improv- The research will focus on directors who hold MDs to
ing and enhancing cash holdings (Ahmed, Alabdullah & determine if they can operate in the organization’s, share-
Shaharudin, 2020). MDs have both advantages and disad- holders’, and stakeholders’ best interests. This includes
vantages. Thus, there are two conflicting theories. The first determining whether they have a beneficial impact on the
theory is that having directors with MDs may raise the company’s cash holdings or not. Furthermore, the directors

76
An Empirical Analysis on the Relationship Between Multiple Directorships and Cash Holding 77

with MDs may improve on money management and con- MDs, and whether there is any relationship that may affect
trol in an efficient and effective manner. negatively or positively on monetary assets. Due to the fact
Moreover, to demonstrate the necessity of corporate that many firms presently have MDs, this study focuses on
governance, the essential thing is to demonstrate that its the implications of a busy directorship on the company’s
rules and conditions are necessary to protect the rights of financial holdings. It aims to determine whether or not
all those related to the company. Many organizations now having the same director for different roles has an impact
have directors who hold MDs rather than just one (Ferris, on cash holdings. If there is an effect, it then attempts to
Jagannathan & Pritchard, 2003). Theft, embezzlement, and determine if it is positive or negative. The findings will aid
bribery were all widespread in the past since there were in assessing whether single or multiple directorships are
no precise regulations and laws recognized and agreed better for keeping funds in the company’s favor.
upon to regulate having MDs internationally, or at least
domestically. Regrettably, this had a detrimental impact
on the country’s economic, political, and social elements. PREVIOUS STUDIES
However, in the past 10 years, the corporate governance
system has evolved as a middleman to protect the interests This section will cover previous studies. Additionally, Ahn,
of everyone involved in the firm, from the owner to the Jiraporn, and Kim (2010) studied the significant effect of
administrative board and to all sorts of stakeholders. MDs numerous directorships on an owner’s value surrounding
are subject to particular corporate governance restrictions, mergers and acquisition announcements. Their result sup-
such as the administrative board being unable to serve on ports the idea that having numerous directorships takes
the audit committee (Sharma & Iselin, 2012). Furthermore, up too much of a director’s time, resulting in ineffective
one director cannot serve on the board of a corporation in supervision. Another study done by Saleh, Shurafa, Shuk-
more than one capacity. The directors must be re-elected eri, Nour, and Maigosh (2020) has scrutinized the impact
every 3 years at the most. As a result, having several of the qualities of numerous directorships and chief exec-
directorships comes with a slew of additional restrictions utive officers (CEOs) on company performance among the
and requirements. The focus of the research will be on the nonfinancial companies recorded on the Palestine Security
role of MDs on cash holdings. Exchange between 2009 and 2016. The findings demon-
strate that a CEO’s “busyness” decreases their performance
and is linked to company losses over which they have
PROBLEM STATEMENT control. Instead, their data display demonstrates that CEO
experience, political ties, and tenure ties all have a favor-
The main problem is that directors who occupy multi- able impact on company success. In the same way, Chou
ple board positions are too busy to perform their duties and Feng (2019) analyzed the effect of numerous direc-
and add great value to the organization. They are self- torships on the loss associated with rising cash holdings.
interested and will not perform adequately and effectively With numerous directorships, they find that the marginal
(Chee & Tham, 2021). Whereas MDs have been shown worth of cash rises. Furthermore, for businesses with larger
to diminish a company’s effectiveness and degrade its managerial agency issues, the positive link between cash
performance (Saleh, Latif, Bakar & Maigoshi, 2020, Han- value and numerous directorships is stronger. Their find-
iffa & Hudaib, 2006; Pathak & Sun, 2013). According ings show that having numerous directorships is linked
to Kamardin, Latif, Adam, and Mohd (2014), in several to more effective cash management, which helps share-
nations throughout the world, the efficacy of directors who holders directly. Furthermore, Kamardin, Latif, Mohd, and
hold MDs has been a source of concern. MDs are governed Adam (2014) examined the link between MDs and the
by various rules in different nations. The number of outside role of the board of directors in Malaysian listed firms
directorships has a detrimental impact on the members of as a check. The logistic model shows that no agency cost
the board of directors’ ability to supervise and discipline is related to MDs, depending on the 75% cutoff for the
entrenched management. Manager’s head over a feeble percent of meetings observed. Nevertheless, the likelihood
board creates choices to private pursuit’s gains rather than of missing board meetings is related to the number of
using monetary resources in the interests of owners. As meetings held. Still, the likelihood of attending more board
a result, shareholders discount the market worth of cash meetings is related to age, tenure, and director owner-
holdings to account for the risk of misallocation (Chou ship. Moreover, Nwakeze and Orjinta (2021) studied the
& Feng, 2019). As maintained by López Iturriaga, and impacts of top management on cash holdings of medical
Morros Rodriguez (2014) after a certain number of boards companies in Ghana and Nigeria, which was statistical
(their findings suggest about four), as managers grow significance at a 5% level. Board diligence was seen to
overburdened by the responsibilities of too many boards, have a significant and positive impact on the cash hold-
loyalty influence dominates. In addition, there is a lack of ings of pharmaceutical firms in Nigeria at a 5% level of
research conducted to examine companies from the MSX to significance. Baccouche, Hadriche, and Omri (2013) stud-
prove the benefits of the system and the conditions used for ied the connection between audit committee MDs and
78 Maather Mohammed Al-Alawi et al.

income administration. Specifically, they look at the influ- Council, may support high levels of numerous director-
ence of audit committee directors holding MDs on the ships, which could degrade corporate governance quality.
quality of earnings management of publicly traded French Furthermore, Jiraporn and Davidson (2008) looked into
businesses. Their findings demonstrate that when audit the impact of several directorships on corporate diversity.
committee members hold multiple outside directorships, They discovered that a director’s workload is inversely
they are unable to effectively supervise earnings manage- proportional to the firm’s value. In other words, compa-
ment. Apart from that, Rahmat, Amin, and Saleh (2018) nies with more outside board seats experience a greater
looked at the relationship among controlling shareholders’ diversity discount. Moreover, Baccouche, Hadriche, and
networking, such as their proxies, and dominating share- Omri (2014) studied the link between MDs of directors and
holders’ several and related-party transactions (RPTs) in the number of board meetings. The impact of a director’s
another study, especially when their interests conflict (RPT accumulation of outside directorships on the frequency
conflict). The assumptions are evaluated using data from of board meetings was studied empirically. From 2008
548 publicly traded businesses in Malaysia from 2012 to to 2010, the research sample consisted of 90 nonfinancial
2014, totaling 1550 observations. The outcomes show that French-listed companies that were part of the SBF 120
CS proxy was not linked with RPTs or RPT conflict. In addi- index. Their findings imply that numerous directorships by
tion, controlling shareholders’ MDs are not linked with board members are positively linked with board meeting
RPTs. However, it has a constructive relationship with RPT frequency. Clements, Neill, and Wertheim (2015) examined
conflict. Furthermore, Baatour, Othman, and Hussainey the two competing hypotheses about whether having com-
(2017) studied the impact of MDs on accrual-based revenue pany directors serve on several boards improves gover-
administration and actual revenue administration. It exam- nance effectiveness or not. To conclude, company directors
ines whether the management of earning methods in Saudi that serve on the external boards of larger businesses can
Arabia improves or deteriorates as the average number provide directors and small-business owners with valu-
of MDs rises or falls. They employed Roy Chowdhury’s able expertise. They discover that encouraging directors
(2006) methodology to determine the degree of actual to serve on external boards of organizations can signifi-
revenue management and Jones’s (1991) cross-sectional cantly increase governance effectiveness using a business’s
approach to determine accrual-based revenue manage- stated internal control problems as a proxy for corporate
ment. According to the evidence, their outcomes have an governance efficacy. Similarly, López Iturriaga and Morros
effect on the actual earnings management in the Kingdom Rodriguez (2014) explored the impact of MDs (business) on
of Saudi Arabia (KSA). Besides, Iqbal (2017) looked at the performance of Spanish-registered firms between 2007
the cash flow volatility and the obvious link between and 2009. After a certain number of boards, the reputation
precautionary cash holdings and Pakistani business finan- effect dominates at modest levels of MDs. Thus, serving on
cial restrictions for 2003–2013. To see how cash flow extra boards of management means more talents as well
fluctuation affects business, companies are classified into as incentives to perform a director obligation, which has a
unconstrained and constrained groups on the basis of four positive influence on the company’s success. After a spe-
criteria: company size, Kaplan-Zingales (KZ) index, group cific number of boards (their findings suggest about four),
affiliation, and dividend payment. Estimation is done in the loyalty influence prevails as managers grow over-
two phases for each criteria using the Generalized Method burdened, adding to the responsibilities of an excessive
of Moments estimator. The results reveal that as cash flow number of boards. Furthermore, Trinh, Elnahass, and Cao
volatility increases, financially restricted businesses raise (2021) investigated the relevance and value of bank cash
their cash holdings, while financially unconstrained com- holding information and the moderating influence of the
panies do not, except for the KZ index criterion. Similarly, board of directors outside of MDs on that relevance. From
Tarkovska (2013) investigated the impact of board activity 2010 to 2018, they represented 70 listed institutions using
on firm cash balances. They look at a large sample of a dual-banking framework (e.g., Islamic and conventional
UK-listed companies from 1997 to 2009 and find evidence banks). According to their results, investors undervalue
of a nonlinear relationship among their proxy for board banks’ large free cash flow holdings. Being active outside
workload as well as the company’s cash reserves. Thus, board members who can handle free cash reserves boosts
their results recommend that when board busyness rises public trust, canceling the negative relevance of cash hold-
beyond a specific limit, it negatively impacts cash holdings, ing data. In addition, Elyasiani and Zhang (2015) looked
financial slack, and net cash. Eulaiwi, Al-Hadi, Taylor, into the connection between the “busyness” of the board
Al-Yahyaee, and Evans (2016) examined the relationship of directors (sitting on numerous boards) and the risk
between external board directorships and family propri- and performance of bank holding companies (BHCs). To
etorship concentration. They find a favorable relationship account for endogeneity, they used the three-stage least
between the number of outside directorships held by board squares approach and instrumental variables to estimate
members and family ownership. Their findings show that various simultaneous equation models. They come up with
growing economies, such as those in the Gulf Cooperation four primary outcomes. First, the workload of directors is
An Empirical Analysis on the Relationship Between Multiple Directorships and Cash Holding 79

favorably related to BHC performance indicators. Second, negative relationship between MDs and acquirer returns.
the “busyness” of managers is inversely associated with As maintained by several previous studies (e.g., Ahmed
BHC risk metrics. Third, the performance risk advantages et al, 2021; Alfadhl & Alabdullah, 2016, 2018; Thomas,
of getting busy managers grew as a result of the financial 2019; Alabduallah, 2019; Alshali, Alhattali, & Ahmed,
crisis of 2007–2009 (weakened). Fourth, if busy managers 2021; Alabdullah, 2016; Kanaan-Jebna, 2014; Alabdullah,
serve on both BHC and nonfinancial boards, they are not 2016c; Alfadhl & Alabdullah, 2016; Alabdullah et al.,
more likely to become issue directors (fail the 75% atten- 2016; Ahmed et al., 2021; Almashhadani & Almashhadani,
dance threshold), and they attend more BHC board ses- 2022; 2021; Alabdullah, 2022; Ahmed, 2020; Alabdullah,
sions than nonfinancial board meetings. Moreover, Lei and 2016; Alabdullah et al., 2014; 2016; 2018; 2019; 2021; 2022;
Deng (2014) examined the impact of MDs on companies’ Almashhadani., 2020; 2021; 2022). Chou and Feng (2019)
value and studied the countervailing impacts of excellence showed that having MDs is linked to more effective
and “busyness.” They used a one-of-a-kind panel data cash management, which helps shareholders directly. Fur-
collection that included all Hong Kong-listed companies. thermore, Baccouche, Hadriche, and Omri (2013) demon-
They discovered that despite independent directors’ busy strated that when audit committee memberships hold mul-
schedules, the number of MDs and the worth of a company tiple external directorships, they are unable to effectively
have a strong and favorable link. Boubaker, Derouiche, and supervise earnings management. Saleh, Shurafa, Shukeri,
Nguyen (2015) studied the function of the governing body Nour, and Maigosh (2020) demonstrated that CEO tenure,
in accumulating financial reserves. They used a sample of political ties, and experience ties have a favorable impact
597 publicly traded French companies from 2001 to 2007. on company success. Nwakeze and Orjinta (2021) observed
They found that companies with more effective boards— that board diligence was seen to have an important and
those that recruit independent directors and split the CEO positive effect on the cash holdings of pharmaceutical
and chair positions—have lower financial reserves than firms in Nigeria at a 5% level of significance. Moreover,
companies with less effective boards. These results support according to Baatour, Othman, and Hussainey (2017), MDS
the view that agency conflicts are influenced by cash man- in the KSA have an excellent and considerable impact on
agement strategies that strong boards of directors serve actual profit management. Clements, Neill, and Wertheim
a critical disciplinary role in a concentrated ownership (2015) demonstrated that encouraging directors to serve on
environment. Other than that, Chen, Lai, and Chen (2015) external boards of businesses that are substantially larger
investigated the association between MDs and acquisi- can improve governance effectiveness. On the contrary,
tions as well as mergers’ performance. The data reveal Tarkovska (2013) showed that when board “busyness”
a constant, horizontal S-shaped relationship between the rises beyond a specific limit, it negatively impacts cash
number of directorships held per director and company holdings, financial slack, and net cash. Likewise, according
M&A wealth development. However, in the post-SOX to the findings of Trinh, Elnahass, and Cao (2021), having
period, the unfavorable relationship at the highest level active board members who can better manage free cash
of directorship becomes minor, implying that SOX’s nec- reserves tends to boost public trust. As a result, the nega-
essary adjustments may offset the harmful impact of over- tive significance of cash holding information is cancelled.
boarded directors. Another study by Brown, Dai, and Zur Alternatively, Lei and Deng (2014) showed that despite
(2019) looked into mergers and acquisitions that eliminate independent directors’ busy schedules, there is a robust
target companies’ whole boards as a bad shock to both and positive relationship between the number of MDs and
board workload and relationships at other companies, as business value. Therefore, the hypothesis is:
a complement to Hauser’s (2018) work. According to their
findings, companies see a decline in board members due H1: There is a positive relationship between Multiple
to acquisitions and mergers that have improved average Directorships and Cash Holding.
monitoring, operational performance, and strategic advi-
sory. In addition, there was an improvement in operational METHODOLOGY
performance and advising of companies that had the least
decline in board communications. Some companies suffer This is a descriptive study using quantitative methods, in
from negative advice and operational performance because which quantitative data are collected through secondary
they have the largest decrease in board communications. data. The dependent variable in this study is cash holdings.
The factors affecting MDs are also called independent
variables. The population of this study was 112 MSX firms
THE RELATIONSHIP BETWEEN MULTIPLE that are currently operating in Oman. In this study, the
DIRECTORSHIPS AND CASH HOLDINGS sample size is 35 firms from financial sector for 2019–2020.
Table 1 shows the population of this research.
The findings of Ahn, Jiraporn, and Kim (2010) supported Table 2 shows the sample size of 35 companies from
the idea that having MDs takes up too much of a director’s financial sector. This research will select financial sector
time, resulting in ineffective supervision. Hence, there is a because it is one of the most important sectors in Oman,
80 Maather Mohammed Al-Alawi et al.

Table 1. Population of research. Table 3. Variable descriptive statistics.

Sectors Companies Mean Minimum Maximum SD
Financial 35 MD 0.609 0.000 0.900 0.201
Industrial 40 CH 5.169 −10.060 35.980 8.405
Service 37
Total 112
Table 4. Discriminant validity constructs.
Not including preferred
shares. Cash Holding Multiple Directorships
Cash Holding 1.000
Table 2. Sample size of research. Multiple Directorships 0.368 1.000
Sectors Companies Years
Financial 35 2019 Table 5. The variance’s explanation.
Financial 35 2020 Matrix R-Square R-Square A
Cash Holding 0.136 0.107

and there are few studies on this sector (Gani, Al Rahbi, &
Ahmed, 2021). Discriminant Validity
There are standards used in PLS to assess discriminant
Measurements of Variables
validity. The square root of each average variance extracted
Cash Holding: Cash holding is measured by several schol- (AVE) for each construct, as well as the opposing con-
ars (such as Opler, Pinkowitz, Stulz, Williamson, 1999). structions, should have a high correlation level. According
This study will measure the cash holdings using the fol- to Fornell and Larcker (1981), to manage discriminant
lowing equation: validity, the square root of each construct in its AVE must
be compared to the constructions’ correlations for all vari-
Cash + Cash Equivalents ous constructs. Table 4 illustrates the discriminant validity
CH = × 100.
Total Assets constructs.
After analyzing the measurement model and ensuring
Multiple Directorships: MDs (a proxy for board busy-
it met all requirements, a structural model analysis was
ness) refer to the number of outside directorships (i.e.,
carried out. An examination of the determination coef-
three, four, or five) held by the board members of a focal
ficient (R2 ) is also completed. During this research, an
firm (Fich & Shivdasani, 2006; Jiraporn, Pornsit, Manohar,
endogenous variable was found to have an R2 value of
Singh, & Chun I Lee, 2009). Busy is calculated using the
0.136. Cash holdings suggest that 13.6% of the variance
natural logarithm of the total number of outside director-
in cash holdings was explained by the MDs, as shown
ships held by all board members, as in previous studies
in Table 5. Hence, the current research greatly meets the
(Eulaiwi, Al-Hadi, Taylor, Al-Yahyaee, and Evans, 2016).
quality requirement.

Data Analysis Hypothesis Testing

Real data from firms in the financial sectors of MSX were Table 6 shows the results related to the hypothesis test-
used as the analytical units for this study. The data are ana- ing and discovery that the hypothesis is supported. The
lyzed using structural equation modeling and the partial outcome revealed that the MDs were positively significant
least squares (PLS) technique. with a cash holding, where it was p < 0.004, t = 2.929. This
outcome shows that MDs have a significant impact on cash
RESULTS AND FINDINGS holdings.

Descriptive Statistics (Financial Sector-2019) Descriptive Statistics (Financial Sector-2020)

According to the descriptive statistics data in Table 3, The dependent variable in Table 7, cash holdings, showed
the dependent variable, cash holdings, showed that the that the level of cash holdings was 5.094%, representing
average level of cash holdings was 5.169%, with a standard the average of cash holdings, with a SD of 9.558, based on
deviation (SD) of 8.405. Additionally, the maximum and descriptive statistics data. Furthermore, the minimum and
minimum values indicated that cash holdings are 35.980 maximum cash holding values were −10.490 and 40.620,
and −10.060, respectively. Furthermore, as per the descrip- respectively. Furthermore, MDs have an average of 0.637%
tive statistic for determinants, MDs have an average of with a SD of 0.193, according to the descriptive statistic
0.609% with a SD of 0.201. Additionally, MDs have mini- for determinants. The maximum and minimum values for
mum and maximum values of 0.000 and 0.900, respectively. MDs are 1.000 and 0.300, respectively.
An Empirical Analysis on the Relationship Between Multiple Directorships and Cash Holding 81

Table 6. Path coefficients.

T Statistics Accept
Original Sample Sample Mean (M) SD (O/STDEV) P-Values or Reject
Multiple Directorships > Cash Holding 0.368 0.370 0.126 2.929 0.004** Accepted
Levels or significance: *p < 0.05 (t > 1.605), **p < 0.01 (t > 2.33), ***p < 0.001 (t > 3.33).

Table 7. Variable descriptive statistics. IMPACT OF MULTIPLE DIRECTORSHIPS

Mean Minimum Maximum SD ON CASH HOLDINGS
MD 0.637 0.300 1.000 0.193
CH 5.094 −10.490 40.620 9.558 MDs are considered one of the crucial internal control tools
for controlling and monitoring the performance of direc-
Table 8. Discriminant validity constructs.
tors and also for safeguarding owners’ interests (Saleh,
Latif, Bakar & Maigoshi, 2020). However, managers serv-
Cash Holding Multiple Directorships
ing on external board seats might devote appropriate
Cash Holding 1.000 effort and time to maintain adequate supervisory authority.
Multiple Directorships 0.300 1.000 In addition, working on numerous boards can provide
managers with experience and knowledge that may qual-
Table 9. The variance’s explanation. ify them to work more efficiently (Perry & Peyer, 2005).
Matrix R-Square R-Square A When there are signs of ineffective monitoring, directors
with more outside board seats incur higher reputational
Cash Holding 0.090 0.060
and financial losses than those with fewer directorships
(Chou & Feng, 2019). Thus, the direction of the relation-
ship between shareholders’ valuations of company cash
Discriminant Validity reserves and numerous directorships is dependent on
There are standards used in PLS to assess the discriminant one’s economic perspective.
validity. The square root of each AVE for each construct, as The outcomes show a significant positive association
well as the opposing constructions, should have a high cor- between the MDs and cash holdings (p < 0.004, t = 2.929).
relation level. According to Fornell and Larcker (1981), to In 2020, the outcomes showed a significant positive asso-
manage discriminant validity, the square root of each con- ciation between the MDs and cash holdings (p < 0.05,
struct in its AVE must be compared to the constructions’ t > 1.605). This revealed that when the size of the
correlations for all various constructs. Table 8 illustrates the MDs matches the number of members, this will result
discriminant validity constructs. in enhanced cash holding management in Omani firms,
The structural model analysis was carried out after which is an excellent indication. The findings are consistent
examining the measurement model and confirming that it with prior research from Saleh, Shurafa, Shukeri, Nour, and
matched all requirements. An examination of the determi- Maigosh (2020). The outcomes show that the CEO’s term,
nation coefficient (R2 ) is also completed. An endogenous experience, and political connections all have a positive
variable with an R2 value of 0.090 was discovered during influence on the company’s performance. Here, this result
this study. MDs are expected to account for 9% of the shows that numerous directorships have a significant
variation in cash holdings. Table 9 shows that the current impact on cash retention, as can be relied upon with the
work is of high quality. previous observation by Chou and Feng (2019). Their find-
ings suggest that having several directorships is associated
with better financial management, which directly benefits
Hypothesis Testing shareholders. According to Nwakeze and Orjinta (2021),
board diligence was shown to have a favorable and sub-
Table 10 provides the findings from the hypothesis testing stantial influence on cash holdings. This project introduces
and the confirmation that the hypothesis is correct. The an understanding of the MDs’ characteristics and their
results found that MDs were positively associated with a impact on cash holdings in the companies listed on the
cash holding (p = 0.050, t = 1.968). MDs have a consider- MSX. There is a defense in the companies’ outcomes; some
able influence on cash holdings, as seen by this result. of the relationships were negative, and some were positive.

Table 10. Path coefficients.

T Statistics Accept
Original Sample Sample Mean (M) SD (O/STDEV) P-Values or Reject
Multiple Directorships > Cash Holding 0.300 0.286 0.152 1.968 0.050* Accepted
Levels or significance: *p < 0.05 (t > 1.605), **p < 0.01 (t > 2.33), ***p < 0.001 (t > 3.33).
82 Maather Mohammed Al-Alawi et al.

CONCLUSION on their boards of directors. Furthermore, if numerous

directorships do truly improve the efficiency and effec-
This research looks at the impact of MDs on cash holdings tiveness of an organization, then all businesses should
in the Sultanate of Oman. The research used a descriptive consider adopting this model. Moreover, all organizations
study with quantitative methods, in which quantitative or businesses are looking to maximize their profits and
data were gathered from secondary sources. Cash holding resources and use them in a more beneficial way that will
is the study’s dependent variable, while independent vari- help the organization solidify its name in the market, and
ables are the MDs. This research has a sample size of 70 the results of this research have proven that a MD has
firms from one sector (financial sector) on the MSX. This the potential to achieve this goal for any organization.
research looked at the financial sector in 2019 and 2020. This study recommended that the organization seriously
Data were analyzed using SmartPLS 3.0, and different consider and evaluate the outcome of a MD as it relates to
factors were compared to study the research purpose. achieving this goal for any organization.
As is well known, there are two contradictory theories:
the first encourages executives to have several director-
ACKNOWLEDGMENT
ships, while the second contradicts the first. The first theory
states that by having executives with a variety of direc-
The authors would like to thank the University of Nizwa
torships, the experience, knowledge, background, quality,
and Dr. Essia Ries Ahmed for assisting in this research.
relationships, and reputation will be much more effective,
efficient, and powerful, and that this will all work in the
corporation’s favor. The second theory contradicts the first, REFERENCES
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