IDEAS home Printed from https://ideas.repec.org/p/zbw/bofrdp/rdp2014_001.html
   My bibliography  Save this paper

Gender differences in financial reporting decision-making: Evidence from accounting conservatism

Author

Listed:
  • Francis, Bill
  • Hasan, Iftekhar
  • Wu, Qiang
  • Park, Jong Chool

Abstract

This paper investigates the effect of CFO gender on corporate financial reporting decision-making. Focusing on firms that experience changes of CFO from male to female, the paper compares the firms' degree of accounting conservatism between pre- and post-transition periods. We find that female CFOs are more conservative in their financial reporting. In addition, we find that the relation between CFO gender and conservatism varies with the levels of various firm risks such as litigation risk, default risk, systematic risk, and CFO specific risk such as job security risk. We further find that risk-aversion of female CFOs is associated with less equity-based compensation, lower firm risk, higher tangibility level, and lower dividend payout level. Overall, the study provides strong support for the notion that female CFOs are more risk averse than male CFOs, which leads female CFOs to adopt more conservative financial reporting policies.

Suggested Citation

  • Francis, Bill & Hasan, Iftekhar & Wu, Qiang & Park, Jong Chool, 2014. "Gender differences in financial reporting decision-making: Evidence from accounting conservatism," Bank of Finland Research Discussion Papers 1/2014, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2014_001
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/212276/1/bof-rdp2014-001.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bin Srinidhi & Ferdinand A. Gul & Judy Tsui, 2011. "Female Directors and Earnings Quality," Contemporary Accounting Research, John Wiley & Sons, vol. 28(5), pages 1610-1644, December.
    2. Niessen, Alexandra & Ruenzi, Stefan, 2007. "Sex matters: Gender differences in a professional setting," CFR Working Papers 06-01, University of Cologne, Centre for Financial Research (CFR).
    3. Graham, John R. & Li, Si & Qiu, Jiaping, 2008. "Corporate misreporting and bank loan contracting," Journal of Financial Economics, Elsevier, vol. 89(1), pages 44-61, July.
    4. Bebchuk, Lucian A. & Cohen, Alma, 2005. "The costs of entrenched boards," Journal of Financial Economics, Elsevier, vol. 78(2), pages 409-433, November.
    5. Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2005. "The economic implications of corporate financial reporting," Journal of Accounting and Economics, Elsevier, vol. 40(1-3), pages 3-73, December.
    6. Chava, Sudheer & Purnanandam, Amiyatosh, 2010. "CEOs versus CFOs: Incentives and corporate policies," Journal of Financial Economics, Elsevier, vol. 97(2), pages 263-278, August.
    7. Michael Monoyios & Andrew Ng, 2012. "Optimal Exercise Of An Executive Stock Option By An Insider," World Scientific Book Chapters, in: Matheus R Grasselli & Lane P Hughston (ed.), Finance at Fields, chapter 21, pages 475-498, World Scientific Publishing Co. Pte. Ltd..
    8. David Hirshleifer & Angie Low & Siew Hong Teoh, 2012. "Are Overconfident CEOs Better Innovators?," Journal of Finance, American Finance Association, vol. 67(4), pages 1457-1498, August.
    9. Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance and Equity Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 107-156.
    10. Richardson, Scott A. & Sloan, Richard G. & Soliman, Mark T. & Tuna, Irem, 2005. "Accrual reliability, earnings persistence and stock prices," Journal of Accounting and Economics, Elsevier, vol. 39(3), pages 437-485, September.
    11. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    12. Jianakoplos, Nancy Ammon & Bernasek, Alexandra, 1998. "Are Women More Risk Averse?," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 620-630, October.
    13. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    14. (Xuefeng) Jiang, John & Petroni, Kathy R. & Yanyan Wang, Isabel, 2010. "CFOs and CEOs: Who have the most influence on earnings management?," Journal of Financial Economics, Elsevier, vol. 96(3), pages 513-526, June.
    15. Roychowdhury, Sugata & Watts, Ross L., 2007. "Asymmetric timeliness of earnings, market-to-book and conservatism in financial reporting," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 2-31, September.
    16. Ahmed, Anwer S. & Duellman, Scott, 2007. "Accounting conservatism and board of director characteristics: An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 411-437, July.
    17. Jones, Jj, 1991. "Earnings Management During Import Relief Investigations," Journal of Accounting Research, Wiley Blackwell, vol. 29(2), pages 193-228.
    18. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    19. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    20. Gul, Ferdinand A. & Srinidhi, Bin & Ng, Anthony C., 2011. "Does board gender diversity improve the informativeness of stock prices?," Journal of Accounting and Economics, Elsevier, vol. 51(3), pages 314-338, April.
    21. Weili GE & Dawn Matsumoto & Jenny Li Zhang, 2011. "Do CFOs Have Style? An Empirical Investigation of the Effect of Individual CFOs on Accounting Practices," Contemporary Accounting Research, John Wiley & Sons, vol. 28(4), pages 1141-1179, December.
    22. Ryan Lafond & Sugata Roychowdhury, 2008. "Managerial Ownership and Accounting Conservatism," Journal of Accounting Research, Wiley Blackwell, vol. 46(1), pages 101-135, March.
    23. Bereskin, Frederick L. & Cicero, David C., 2013. "CEO compensation contagion: Evidence from an exogenous shock," Journal of Financial Economics, Elsevier, vol. 107(2), pages 477-493.
    24. Francis, J & Philbrick, D & Schipper, K, 1994. "Shareholder Litigation And Corporate Disclosures," Journal of Accounting Research, Wiley Blackwell, vol. 32(2), pages 137-164.
    25. Adams, Renée B. & Ferreira, Daniel, 2009. "Women in the boardroom and their impact on governance and performance," Journal of Financial Economics, Elsevier, vol. 94(2), pages 291-309, November.
    26. Martien Lubberink & Carel Huijgen, 2001. "A Wealth-Based Explanation for Earnings Conservatism," Review of Finance, European Finance Association, vol. 5(3), pages 323-349.
    27. Chan, Lilian H. & Chen, Kevin C.W. & Chen, Tai-Yuan & Yu, Yangxin, 2012. "The effects of firm-initiated clawback provisions on earnings quality and auditor behavior," Journal of Accounting and Economics, Elsevier, vol. 54(2), pages 180-196.
    28. Alok Kumar, 2010. "Self‐Selection and the Forecasting Abilities of Female Equity Analysts," Journal of Accounting Research, Wiley Blackwell, vol. 48(2), pages 393-435, May.
    29. Palmrose, Zoe-Vonna & Richardson, Vernon J. & Scholz, Susan, 2004. "Determinants of market reactions to restatement announcements," Journal of Accounting and Economics, Elsevier, vol. 37(1), pages 59-89, February.
    30. Beaver, WH & Ryan, SG, 2000. "Biases and lags in book value and their effects on the ability of the book-to-market ratio to predict book return on equity," Journal of Accounting Research, Wiley Blackwell, vol. 38(1), pages 127-148.
    31. Jiang, John (Xuefeng) & Harris Stanford, Mary & Xie, Yuan, 2012. "Does it matter who pays for bond ratings? Historical evidence," Journal of Financial Economics, Elsevier, vol. 105(3), pages 607-621.
    32. Hui, Kai Wai & Matsunaga, Steve & Morse, Dale, 2009. "The impact of conservatism on management earnings forecasts," Journal of Accounting and Economics, Elsevier, vol. 47(3), pages 192-207, June.
    33. Kellogg, Robert L., 1984. "Accounting activities, security prices, and class action lawsuits," Journal of Accounting and Economics, Elsevier, vol. 6(3), pages 185-204, December.
    34. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2006. "Managerial incentives and risk-taking," Journal of Financial Economics, Elsevier, vol. 79(2), pages 431-468, February.
    35. Basu, Sudipta, 1997. "The conservatism principle and the asymmetric timeliness of earnings," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 3-37, December.
    36. Graham, John R. & Harvey, Campbell R. & Puri, Manju, 2013. "Managerial attitudes and corporate actions," Journal of Financial Economics, Elsevier, vol. 109(1), pages 103-121.
    37. Alexandra Bernasek & Stephanie Shwiff, 2001. "Gender, Risk, and Retirement," Journal of Economic Issues, Taylor & Francis Journals, vol. 35(2), pages 345-356, June.
    38. Smith, Clifford W. & Stulz, René M., 1985. "The Determinants of Firms' Hedging Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(4), pages 391-405, December.
    39. Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, vol. 9(Apr), pages 7-26.
    40. Givoly, Dan & Hayn, Carla, 2000. "The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative?," Journal of Accounting and Economics, Elsevier, vol. 29(3), pages 287-320, June.
    41. Gopal Krishnan & Linda Parsons, 2008. "Getting to the Bottom Line: An Exploration of Gender and Earnings Quality," Journal of Business Ethics, Springer, vol. 78(1), pages 65-76, March.
    42. Zhong Zhao, 2004. "Using Matching to Estimate Treatment Effects: Data Requirements, Matching Metrics, and Monte Carlo Evidence," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 91-107, February.
    43. Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-474, June.
    44. Stanley M. Atkinson & Samantha Boyce Baird & Melissa B. Frye, 2003. "Do Female Mutual Fund Managers Manage Differently?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(1), pages 1-18, March.
    45. Zhang, Jieying, 2008. "The contracting benefits of accounting conservatism to lenders and borrowers," Journal of Accounting and Economics, Elsevier, vol. 45(1), pages 27-54, March.
    46. Huang, Jiekun & Kisgen, Darren J., 2013. "Gender and corporate finance: Are male executives overconfident relative to female executives?," Journal of Financial Economics, Elsevier, vol. 108(3), pages 822-839.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bill Francis & Iftekhar Hasan & Jong Chool Park & Qiang Wu, 2015. "Gender Differences in Financial Reporting Decision Making: Evidence from Accounting Conservatism," Contemporary Accounting Research, John Wiley & Sons, vol. 32(3), pages 1285-1318, September.
    2. repec:zbw:bofrdp:2014_001 is not listed on IDEAS
    3. Li, Yiwei & Zeng, Yeqin, 2019. "The impact of top executive gender on asset prices: Evidence from stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 528-550.
    4. Simon Ho & Annie Li & Kinsun Tam & Feida Zhang, 2015. "CEO Gender, Ethical Leadership, and Accounting Conservatism," Journal of Business Ethics, Springer, vol. 127(2), pages 351-370, March.
    5. Alaa Mansour Zalata & Collins Ntim & Ahmed Aboud & Ernest Gyapong, 2019. "Female CEOs and Core Earnings Quality: New Evidence on the Ethics Versus Risk-Aversion Puzzle," Journal of Business Ethics, Springer, vol. 160(2), pages 515-534, December.
    6. Datta, Sudip & Doan, Trang & Toscano, Francesca, 2023. "Top executive gender, corporate culture, and the value of corporate cash holdings," Journal of Financial Stability, Elsevier, vol. 67(C).
    7. Chengru Hu & Wei Jiang, 2019. "Managerial risk incentives and accounting conservatism," Review of Quantitative Finance and Accounting, Springer, vol. 52(3), pages 781-813, April.
    8. Armstrong, Christopher S. & Guay, Wayne R. & Weber, Joseph P., 2010. "The role of information and financial reporting in corporate governance and debt contracting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 179-234, December.
    9. Doan, Trang & Iskandar-Datta, Mai, 2020. "Are female top executives more risk-averse or more ethical? Evidence from corporate cash holdings policy," Journal of Empirical Finance, Elsevier, vol. 55(C), pages 161-176.
    10. repec:zbw:bofrdp:2014_016 is not listed on IDEAS
    11. Sudipta Basu & Yi Liang, 2019. "Director–Liability–Reduction Laws and Conditional Conservatism," Journal of Accounting Research, Wiley Blackwell, vol. 57(4), pages 889-917, September.
    12. Datta, Sudip & Doan, Trang & Toscano, Francesca, 2021. "Top executive gender, board gender diversity, and financing decisions: Evidence from debt structure choice," Journal of Banking & Finance, Elsevier, vol. 125(C).
    13. Kravet, Todd D., 2014. "Accounting conservatism and managerial risk-taking: Corporate acquisitions," Journal of Accounting and Economics, Elsevier, vol. 57(2), pages 218-240.
    14. Feng Chen & Qingyuan Li & Li Xu, 2021. "Universal demand laws and the monitoring demand for accounting conservatism," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(7-8), pages 1246-1289, July.
    15. Francis, Bill & Hasan, Iftekhar & Wu, Qiang & Yan, Meng, 2014. "Are female CFOs less tax aggressive? Evidence from tax aggressiveness," Research Discussion Papers 16/2014, Bank of Finland.
    16. Dina El Mahdy & Fatima Alali, 2023. "Female CFOs and managerial opportunism," Review of Quantitative Finance and Accounting, Springer, vol. 60(3), pages 1161-1207, April.
    17. Luo, Jin-hui & Peng, Chenchen & Zhang, Xin, 2020. "The impact of CFO gender on corporate fraud: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    18. Scott B. Jackson & Xiaotao (Kelvin) Liu, 2010. "The Allowance for Uncollectible Accounts, Conservatism, and Earnings Management," Journal of Accounting Research, Wiley Blackwell, vol. 48(3), pages 565-601, June.
    19. Khalifa, Mariem & Trabelsi, Samir & Matoussi, Hamadi, 2022. "Leverage, R&D expenditures, and accounting conservatism: Evidence from technology firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 285-304.
    20. Pham, Mia Hang, 2020. "In law we trust: Lawyer CEOs and stock liquidity," Journal of Financial Markets, Elsevier, vol. 50(C).
    21. Chen, Jie & Leung, Woon Sau & Song, Wei & Goergen, Marc, 2019. "Why female board representation matters: The role of female directors in reducing male CEO overconfidence," Journal of Empirical Finance, Elsevier, vol. 53(C), pages 70-90.
    22. Ha, Joohyung, 2019. "Agency costs of free cash flow and conditional conservatism," Advances in accounting, Elsevier, vol. 46(C), pages 1-1.

    More about this item

    Keywords

    Accounting Conservatism; Gender; CFO; Risk-Aversion;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:bofrdp:rdp2014_001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/bofgvfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.