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Making honest men of them: Institutional investors, financial reporting, and the appointment of female directors to all-male boards

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  • Lai, Karen M.Y.
  • Khedmati, Mehdi
  • Gul, Ferdinand A.
  • Mount, Matthew P.

Abstract

In this paper, we theorize that dedicated institutional investors are more likely than transient institutional investors to appoint female directors to investee firms with all-male boards, particularly those with high opacity. We conjecture that dedicated investors appoint female directors as a governance mechanism to improve the financial reporting quality of these investee firms. Specifically, we find that through the appointment of female directors, dedicated institutional investors trigger the release of stockpiled negative accounting information, thereby increasing the likelihood of a stock price crash risk. We also show that dedicated investors, through the appointment of female directors, improve investee firms' corporate disclosure environment by decreasing earnings management. Finally, we find that through continued service on investee firms' boards, female directors reduce the future likelihood of a stock price crash.

Suggested Citation

  • Lai, Karen M.Y. & Khedmati, Mehdi & Gul, Ferdinand A. & Mount, Matthew P., 2023. "Making honest men of them: Institutional investors, financial reporting, and the appointment of female directors to all-male boards," Journal of Corporate Finance, Elsevier, vol. 78(C).
  • Handle: RePEc:eee:corfin:v:78:y:2023:i:c:s0929119922001778
    DOI: 10.1016/j.jcorpfin.2022.102334
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    More about this item

    Keywords

    Institutional investors; Board composition; Female directors; Financial reporting quality;
    All these keywords.

    JEL classification:

    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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