Female CFOs and managerial opportunism

Dina El Mahdy () and Fatima Alali ()
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Dina El Mahdy: Morgan State University
Fatima Alali: California State University at Fullerton

Review of Quantitative Finance and Accounting, 2023, vol. 60, issue 3, No 10, 1207 pages

Abstract: Abstract We employ the Self-Selection Theory and provide new evidence into earnings management practices by female Chief Financial Officers (CFOs). Using 8,288 firm-year observations from 1997 to 2018, we find that female CFOs are positively associated with real earnings management (REM). To gain insights into documented female CFOs’ opportunism, we predict and find empirical evidence in line with the expectations that female CFOs facing pressure from age and lack of diversity are positively associated with REM. Likewise, the association between REM and female CFOs dissipates among firms with no pressures from wage, age, or lack of diversity. We further examine the moderating effect of institutional investors and female CFOs' managerial abilities on the association between REM and female CFOs. Our results suggest that the positive association between REM and female CFOs is observable only among firms with high institutional investors, signaling external pressure on female CFOs to manipulate earnings. Collectively, we refer to the pressure factors on female CFOs as the Glass Rock because they are invisible yet drive female CFOs to behave opportunistically. As expected, the positive association between REM and female CFOs is noticeable only among firms with high female CFOs’ managerial abilities. Our results are robust to multiple specifications such as using a two-stage regression model (instrumental variable), a propensity score matching sample, a robust standard regression clustered by firm, and a subsample of firms that switched from male-to-female CFOs versus male-to-male CFOs.

Keywords: Chief financial officers; Gender; Real earnings management; Institutional investors; Managerial ability; Workplace pressure (search for similar items in EconPapers)
JEL-codes: C50 J70 L50 M10 M40 M41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11156-022-01124-1

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