A new academic research study indicates that companies with women serving as chief financial officers are significantly less likely to misreport financial results.
The study, by three professors from the University of Alabama, a professor from the University of Missouri, and one from St. Louis University used a “financial statement deviation” score to predict the likelihood of financial misreporting and found that companies with women CFOs at the helm had, on average, a 2.6 percent lower FSD score than those with male CFOs.
The academic study also found that it’s not just a correlation, but the results strongly support causation, according to its authors. Regression analyses tested the results against myriad variables to ensure a finding of causation.
“Given the increasing pressure on firms to have more female representation in top management positions, understanding how executive gender impacts corporate financial reporting can inform researchers, policy-makers, regulators, and the general public,” the study says.
The study’s authors also suggest that other factors contribute to the relationship between gender and financial reporting issues. “We argue that the relation between CFO gender and financial misreporting will be contingent on governance mechanisms (e.g., institutional ownership and analyst coverage) such that misreporting of firms with male CFOs will differ more from that of firms with female CFOs when governance is weak. Our results, based on a novel leading indicator of the likelihood of financial misreporting, provide support for our predictions,” they wrote in an abstract of the study.
The study will be published in the August issue of the Academy of Management Journal. 