Gender Differences in Financial Reporting DecisionMaking: Evidence from Accounting Conservatism
Bill Francis , Iftekhar Hasan , Jong Chool Parka, Qiang Wu *
Lally School of Management and Technology, Rensselaer Polytechnic Institute, Troy, NY 12180, USA
報告人:佘濰任
Abstract
※This paper investigates the effect of gender on
corporate financial reporting decision-making.
※By focusing on firms that experience changes
of CFO from male to female, we compare the
firms’ degree of reporting conservatism
between pre- and posttransition period.
Gender Differences in Financial
Reporting Decision-Making
Section1:
Introduction
Section2:
Relevant research and hypothesis
Section3:
Introduces the measures of conservatism in our analysis
Section4 :
Sample selection
Section5 :
The results of multivariate tests
Introduction
• Gender differences in attitudes towards risk
and in risk related behavior have long been
studied in the sociology, psychology and
economics literatures
• We examine whether female CFOs follow a
more conservative approach in their financial
reporting compared to their alecounterparts.
Literature Review
• Watts (2003a) summarizes that accounting
conservatism is an efficient mechanism to
reduce information asymmetry and mitigate
interest conflicts between management and
various contracting parties, and reduce
potential litigations by outside parties,
especially shareholders.
Literature Review
• Prior studies also find that CEO/CFO turnover
rate is relatively higher around financial
restatements, especially due to the use of
aggressive accounting
(e.g., Desai et al. (2006) and Hennes et al. (2008)
Literature Review
• Jiang et al. (2008) document that earnings
management increase more in the CFO’s
equity incentives than in the CEO’s equity
incentives
• Chava and Purnanandam (2007) find that a
firm’s debt structure is mostly influenced by
the CFO’s incentive
Data
• S&P 1,500 companies from 1988-2007
(1) market to book ratio [Beaver and Ryan (2000)]
(2) accrual measure[Givoly and Hayn (2000)]
(3)skewness measure[Givoly and Hayn (2000) and Zhang (2008)]
Method
• We examine the impact of endogeneity on our
results
• Fama-French Three-Factor Model
• CFO change(male to female)
stock return volatility and cost of bank loans
• The market reacts to the quarterly earnings
announcements differently
2. Conservative Financial Reporting and
Gender Differences in Risk Attitudes
※ 2.1 Information asymmetry, risk and accounting
conservatism
Conservatism has long been an important
convention in financial reporting.
Basu (1997) interprets conservatism as “the
accountant’s tendency to require a higher degree
of verification to recognize good news as gains
than to recognize bad news as losses.”
2. Conservative Financial Reporting and
Gender Differences in Risk Attitudes
• 2.2 Gender differences in risk attitudes
※In psychology and sociology literature the
women are more risk-averse than men.
Levin et al. (1988)、Eckel and Grossman (2003)
※ Bernasek and Shwiff (2001) also find that women
allocate their pension more conservatively than men
※ Johnson and Powell (1994) study betting decisions
on horse and dog races
2. Conservative Financial Reporting and
Gender Differences in Risk Attitudes
• 2.2 Gender differences in risk attitudes
※ Jianakoplos and Bernasek (1998) find single women
are more risk-averse than single men in household
holdings investment decisions
※ Huang and Kingen (2008) investigate how gender
differences of CFOs affect various corporate financial
decisions
◎To summarize, most of the evidence in the literature
points to gender differences in risk attitudes, with
females being more risk-averse
3. Measurement of Accounting
Conservatism
Because there is no single general accepted
measure of conservatism in the accounting
literature, we use three different individual
measures: a market-value-based measure
(CON_MTB) and two earnings-based measures
(CON_ACCRUAL and CON_SKEWNESS)
CON_MTB
※Our first measure of conservatism, CON_MTB,
is the market to book ratio of a firm. Higher
CON_MTB indicates greater conservatism.
※Market to book is a commonly used measure
of conservatism in the accounting literature
CON_ACCRUAL
• Our second measure of conservatism,
CON_ACCRUAL, is the cumulative
nonoperating accruals deflated by cumulative
total assets, and multiplied by -1.
• Positive values of CON_ACCRUAL indicate
greater conservatism
CON_SKEWNESS
• Our third measure of conservatism,
CON_SKEWNESS, is the time-series skewness
of earnings
• We also multiply it by -1 to make the results
easy to interpret
4. Data
• Our primary research design is to compare
accounting conservatism between the pretransition period and the post-transition
period for male to female CFO turnover firms.
• Robustness tests:
1. male to male CFO transition sample
2. female to male CFO transition sample
4. Data
• The gender information is mainly from
ExecuComp database which covers most S&P
1500 public companies.
• S&P 1500 includes S&P 500, S&P Midcap 400,
and S&P SmallCap 600, and it covers about
85% of the US equities market.
Table 1: Distribution of female CFOs in
the transition year
Table 2: Summary statistics and
univariate comparison
Table 3: Probit regression of hiring a
female CFO
Table 4: Male to Female CFO Change
and Accounting Conservatism
Table 5: Female CFOs and Accounting Conservatism:
Difference-in-Difference Regression Results
Table 6: Female CFOs and Accounting
Conservatism: Propensity Score Match Results
Table 7: Robustness Test: Asymmetric Timeliness
Measure of Accounting Conservatism
Table 8: Robustness Test: Are Results
Driven by Corporate Governance?
Table 9: Robustness Test: Are Results
Driven by CFO Ownership?
Table 10: Robustness Test: Are Results Driven by
Simultaneous Changes of CFO and CEO?
Table 11: Robustness Test: Female to Male CFO
Transition and Accounting Conservatism
Table 12: Male to female CFO Transition and Long-Run
Firm Performance: Fama- French Three-Factor Model
Table 13: Market Reactions to Earnings Announcements
before and after Male to Female CFO Transitions
Table 14: Male to Female CFO Transition, Analyst
Forecast, Stock Return Volatility and Cost of Debt
6 Conclusions
We find that subsequent to the hiring of a
female CFO there is a significant increase in
the degree of accounting conservatism
compared to that of their male predecessors.