Does board gender diversity matter? the impact of working capital management on profitability

Abstract

This study examines the effect of working capital management on firm profitability and investigates whether board gender diversity moderates this relationship. Working capital management is disaggregated into Days Inventory Outstanding (DIO), Days Payable Outstanding (DPO), and Days Sales Outstanding (DSO). Profitability is measured by return on assets (ROA), while board gender diversity is measured by the proportion of female directors on the board. The sample consists of 863 U.S. non-financial firms from six economic sectors during 2014–2025, representing 5,618 firm-year observations. The empirical analysis applies firm fixed-effects regressions with firm-clustered standard errors. The direct results show that DIO, DPO, and DSO have negative and statistically significant effects on ROA, indicating that firms with longer inventory holding periods, payable periods, and receivable collection periods tend to experience lower profitability. The negative effects of DIO and DSO are consistent with the hypotheses. However, the negative effect of DPO contradicts the hypothesis and the traditional view that longer payable periods improve profitability. This finding suggests that extended supplier payment periods may be associated with lower profitability rather than improved profitability. The moderating results indicate that board gender diversity does not influence all working capital components in the same way. Female board representation weakens the negative relationship between DSO and ROA, supporting the hypothesis that board gender diversity helps mitigate the adverse profitability effects of longer receivable collection periods. In contrast, female board representation strengthens the negative relationship between DPO and ROA, which contradicts the hypothesis that female board representation would weaken the positive relationship between DPO and ROA. Meanwhile, the estimated moderating effect of female board representation on the DIO–ROA relationship is negative but statistically insignificant, providing no evidence that board gender diversity moderates the relationship between DIO and ROA. Industry-specific regressions further show that the moderating role of board gender diversity differs across sectors. Overall, the findings suggest that board gender diversity does not moderate all working capital components uniformly, but its role is more evident in receivables and payables. This study provides practical implications for managers, boards, and external stakeholders. For managers, the findings highlight the importance of managing inventory, payables, and receivables separately rather than relying solely on aggregate working capital measures. In particular, firms should closely monitor excessive inventory holding, delayed customer collections, and extended supplier payment periods, as each may reduce profitability through different operational channels. For boards and governance committees, the results suggest that board gender diversity can strengthen oversight of working capital decisions, especially in relation to receivables and payables. For investors, creditors, analysts, and lenders, the findings offer useful signals for evaluating whether firm profitability is supported by efficient working capital management or weakened by inefficiencies in individual working capital management components