IDEAS home Printed from https://ideas.repec.org/a/eee/empfin/v55y2020icp161-176.html
   My bibliography  Save this article

Are female top executives more risk-averse or more ethical? Evidence from corporate cash holdings policy

Author

Listed:
  • Doan, Trang
  • Iskandar-Datta, Mai

Abstract

This study examines the impact of gender in the C-Suite on corporate decision making. In particular, we investigate the influence of the Chief Financial Officer (CFO)’s gender on the agency costs of free cash flow. We document that female CFOs reduce cash holdings in firms with excess cash, which should alleviate the agency conflict arising from managerial discretion. We also find that female CFOs at firms with surplus cash increase distributions to shareholders in the form of dividends. The empirical evidence also shows that the reduction in cash does not lead to suboptimal investment policies. Of the two competing hypotheses – gender-ethics hypothesis and risk-aversion hypothesis—these results are consistent with the view that female CFOs undertake more ethical but not more risk-averse decisions than their male counterparts. Our results are robust to a battery of robustness tests.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:empfin:v:55:y:2020:i:c:p:161-176
    DOI: 10.1016/j.jempfin.2019.11.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S092753981930101X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jempfin.2019.11.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    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. Thomas W. Bates & Kathleen M. Kahle & René M. Stulz, 2009. "Why Do U.S. Firms Hold So Much More Cash than They Used To?," Journal of Finance, American Finance Association, vol. 64(5), pages 1985-2021, October.
    3. Kevin Campbell & Antonio Mínguez-Vera, 2008. "Gender Diversity in the Boardroom and Firm Financial Performance," Journal of Business Ethics, Springer, vol. 83(3), pages 435-451, December.
    4. Stewart C. Myers & Raghuram G. Rajan, 1998. "The Paradox of Liquidity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 733-771.
    5. 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.
    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. Sabri Boubaker & Imen Derouiche & Duc Nguyen, 2015. "Does the board of directors affect cash holdings? A study of French listed firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(2), pages 341-370, May.
    8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    9. Ran Duchin, 2010. "Cash Holdings and Corporate Diversification," Journal of Finance, American Finance Association, vol. 65(3), pages 955-992, June.
    10. Mario Daniele Amore & Orsola Garofalo & Alessandro Minichilli, 2014. "Gender Interactions Within the Family Firm," Management Science, INFORMS, vol. 60(5), pages 1083-1097, May.
    11. Mohamad Zeidan, 2013. "Effects of Illegal Behavior on the Financial Performance of US Banking Institutions," Journal of Business Ethics, Springer, vol. 112(2), pages 313-324, January.
    12. repec:bla:jfinan:v:59:y:2004:i:4:p:1777-1804 is not listed on IDEAS
    13. Renée B. Adams & Patricia Funk, 2012. "Beyond the Glass Ceiling: Does Gender Matter?," Management Science, INFORMS, vol. 58(2), pages 219-235, February.
    14. Anand M. Goel & Anjan V. Thakor, 2008. "Overconfidence, CEO Selection, and Corporate Governance," Journal of Finance, American Finance Association, vol. 63(6), pages 2737-2784, December.
    15. Jensen, Gerald R. & Lundstrum, Leonard L. & Miller, Robert E., 2010. "What do dividend reductions signal?," Journal of Corporate Finance, Elsevier, vol. 16(5), pages 736-747, December.
    16. Jianakoplos, Nancy Ammon & Bernasek, Alexandra, 1998. "Are Women More Risk Averse?," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 620-630, October.
    17. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    18. Jennifer Di Noia, 2002. "Indicators of Gender Equality for American States and Regions: An Update," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 59(1), pages 35-77, July.
    19. George Kanatas & Jianping Qi, 2004. "Dividends and Debt with Managerial Agency and Lender Holdup," Management Science, INFORMS, vol. 50(9), pages 1249-1260, September.
    20. Wang, Weimin & Shin, Yong-Chul & Francis, Bill B., 2012. "Are CFOs’ Trades More Informative Than CEOs’ Trades?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(4), pages 743-762, August.
    21. Opler, Tim & Pinkowitz, Lee & Stulz, Rene & Williamson, Rohan, 1999. "The determinants and implications of corporate cash holdings," Journal of Financial Economics, Elsevier, vol. 52(1), pages 3-46, April.
    22. Eckel, Catherine C. & Grossman, Philip J., 2008. "Men, Women and Risk Aversion: Experimental Evidence," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 113, pages 1061-1073, Elsevier.
    23. Dittmar, Amy & Mahrt-Smith, Jan, 2007. "Corporate governance and the value of cash holdings," Journal of Financial Economics, Elsevier, vol. 83(3), pages 599-634, March.
    24. Brad M. Barber & Terrance Odean, 2001. "Boys will be Boys: Gender, Overconfidence, and Common Stock Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(1), pages 261-292.
    25. Vandegrift, Donald & Brown, Paul, 2005. "Gender differences in the use of high-variance strategies in tournament competition," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 34(6), pages 834-849, December.
    26. Campello, Murillo & Graham, John R. & Harvey, Campbell R., 2010. "The real effects of financial constraints: Evidence from a financial crisis," Journal of Financial Economics, Elsevier, vol. 97(3), pages 470-487, September.
    27. Palazzo, Berardino, 2012. "Cash holdings, risk, and expected returns," Journal of Financial Economics, Elsevier, vol. 104(1), pages 162-185.
    28. Gottesman, Aron A. & Morey, Matthew R., 2006. "Manager education and mutual fund performance," Journal of Empirical Finance, Elsevier, vol. 13(2), pages 145-182, March.
    29. Chen, Jie & Leung, Woon Sau & Evans, Kevin P., 2018. "Female board representation, corporate innovation and firm performance," Journal of Empirical Finance, Elsevier, vol. 48(C), pages 236-254.
    30. 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.
    31. 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.
    32. 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.
    33. Dwyer, Peggy D. & Gilkeson, James H. & List, John A., 2002. "Gender differences in revealed risk taking: evidence from mutual fund investors," Economics Letters, Elsevier, vol. 76(2), pages 151-158, July.
    34. Uri Gneezy & Muriel Niederle & Aldo Rustichini, 2003. "Performance in Competitive Environments: Gender Differences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 1049-1074.
    35. Baskin, Jonathan B, 1987. "Corporate Liquidity in Games of Monopoly Power," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 312-319, May.
    36. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    37. Tensie Steijvers & Mervi Niskanen, 2013. "The determinants of cash holdings in private family firms," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(2), pages 537-560, June.
    38. DeAngelo, Harry & DeAngelo, Linda & Stulz, Rene M., 2006. "Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory," Journal of Financial Economics, Elsevier, vol. 81(2), pages 227-254, August.
    39. Yu Liu & Zuobao Wei & Feixue Xie, 2016. "CFO gender and earnings management: evidence from China," Review of Quantitative Finance and Accounting, Springer, vol. 46(4), pages 881-905, May.
    40. Pacula, Rosalie Liccardo, 1997. "Women and Substance Use: Are Women Less Susceptible to Addiction?," American Economic Review, American Economic Association, vol. 87(2), pages 454-459, May.
    41. Richard A. Bernardi & Donald F. Arnold, 1997. "An Examination of Moral Development within Public Accounting by Gender, Staff Level, and Firm," Contemporary Accounting Research, John Wiley & Sons, vol. 14(4), pages 653-668, December.
    42. Iskandar-Datta, Mai E. & Jia, Yonghong, 2012. "Cross-country analysis of secular cash trends," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 898-912.
    43. Sunden, Annika E & Surette, Brian J, 1998. "Gender Differences in the Allocation of Assets in Retirement Savings Plans," American Economic Review, American Economic Association, vol. 88(2), pages 207-211, May.
    44. Cline, Brandon N. & Yore, Adam S., 2016. "Silverback CEOs: Age, experience, and firm value," Journal of Empirical Finance, Elsevier, vol. 35(C), pages 169-188.
    45. Custódio, Cláudia & Metzger, Daniel, 2014. "Financial expert CEOs: CEO׳s work experience and firm׳s financial policies," Journal of Financial Economics, Elsevier, vol. 114(1), pages 125-154.
    46. Behr, Andreas & Heid, Frank, 2011. "The success of bank mergers revisited. An assessment based on a matching strategy," Journal of Empirical Finance, Elsevier, vol. 18(1), pages 117-135, January.
    47. 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.
    48. Orens, Raf & Reheul, Anne-Mie, 2013. "Do CEO demographics explain cash holdings in SMEs?," European Management Journal, Elsevier, vol. 31(6), pages 549-563.
    49. Jurkus, Anthony F. & Park, Jung Chul & Woodard, Lorraine S., 2011. "Women in top management and agency costs," Journal of Business Research, Elsevier, vol. 64(2), pages 180-186, February.
    50. Miguel A. Ferreira & Antonio S. Vilela, 2004. "Why Do Firms Hold Cash? Evidence from EMU Countries," European Financial Management, European Financial Management Association, vol. 10(2), pages 295-319, June.
    51. Kim, Chang-Soo & Mauer, David C. & Sherman, Ann E., 1998. "The Determinants of Corporate Liquidity: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(3), pages 335-359, September.
    52. Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-474, June.
    53. 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.
    54. 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.
    55. Faccio, Mara & Marchica, Maria-Teresa & Mura, Roberto, 2016. "CEO gender, corporate risk-taking, and the efficiency of capital allocation," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 193-209.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Datta, Sudip & Doan, Trang & Iskandar-Datta, Mai, 2022. "Top executives’ gender and analysts' earnings forecasts," Finance Research Letters, Elsevier, vol. 47(PA).
    2. Huang, Yichu & Fang, Feifei & Fan, Yaoyao & Ly, Kim Cuong, 2024. "Do ‘Lehman Sisters’ work in China? Women on boards and bank risk," International Review of Financial Analysis, Elsevier, vol. 93(C).
    3. Luis Porcuna-Enguix & Elisabeth Bustos-Contell & José Serrano-Madrid & Gregorio Labatut-Serer, 2021. "Constructing the Audit Risk Assessment by the Audit Team Leader When Planning: Using Fuzzy Theory," Mathematics, MDPI, vol. 9(23), pages 1-22, November.
    4. Wang, Li-Hsun & Fung, Hung-Gay, 2022. "The effect of female CEO and CFO on tail risk and firm value," Finance Research Letters, Elsevier, vol. 47(PB).
    5. Robert Huterski & Grazyna Voss & Agnieszka Huterska, 2020. "Professional Ethics in Accounting as Assessed by Managers of Economic Units," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 720-731.
    6. Peng, Cong & Chau, Ka Yin, 2023. "Independent audit quality and corporate cash holdings," Finance Research Letters, Elsevier, vol. 58(PB).
    7. Fai Lim Loi & Jean Jinghan Chen & Zhuo Qiao, 2023. "CEO cultural background and corporate cash holdings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1069-1100, April.
    8. Aolin Leng & Fuli Kang, 2022. "Impact of two-child policy on female employment and corporate performance: Empirical evidence from Chinese listed companies from 2010 to 2020," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-13, December.
    9. 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).
    10. Md. Rashidul Islam, 2024. "How to Achieve Financial Flexibility: the Role of Corporate Governance," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 6541-6577, June.
    11. Saleh F. A. Khatib & Dewi Fariha Abdullah & Ernie Hendrawaty & Ahmed A. Elamer, 2022. "A bibliometric analysis of cash holdings literature: current status, development, and agenda for future research," Management Review Quarterly, Springer, vol. 72(3), pages 707-744, September.
    12. Diego A. Martin, 2024. "Women Seeking Jobs with Limited Information: Evidence from Iraq," CID Working Papers 157a, Center for International Development at Harvard University.
    13. Nguyen, Thanh Thi Phuong & Thai, Hanh Minh, 2022. "Effects of female directors on gender diversity at lower organization levels and CSR performance: Evidence in Japan," Global Finance Journal, Elsevier, vol. 53(C).
    14. Ruiying Xiao, 2024. "Female Entrepreneur on Board:Assessing the Effect of Gender on Corporate Financial Constraints," Papers 2401.02134, arXiv.org.
    15. Stefan Milojević & Marko Milašinović & Aleksandra Mitrović & Jasmina Ognjanović & Jelena Raičević & Nebojša Zdravković & Snežana Knežević & Malči Grivec, 2023. "Board Gender Diversity and Banks Profitability for Business Viability: Evidence from Serbia," Sustainability, MDPI, vol. 15(13), pages 1-16, July.
    16. Bilal, & Komal, Bushra & Ezeani, Ernest & Usman, Muhammad & Kwabi, Frank & Ye, Chengang, 2023. "Do the educational profile, gender, and professional experience of audit committee financial experts improve financial reporting quality?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 53(C).

    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. Jarkko Peltomäki & Jukka Sihvonen & Steve Swidler & Sami Vähämaa, 2021. "Age, gender, and risk‐taking: Evidence from the S&P 1500 executives and market‐based measures of firm risk," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1988-2014, October.
    2. 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).
    3. 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).
    4. Sah, Nilesh B., 2021. "Cash is Queen: Female CEOs’ propensity to hoard cash," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    5. 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.
    6. Liu, Yin & Neely, Pamela & Karim, Khondkar, 2022. "The impact of CFO gender on corporate overinvestment," Advances in accounting, Elsevier, vol. 57(C).
    7. Xu, Xixiong & Li, Wanli & Li, Yaoqin & Liu, Xing, 2019. "Female CFOs and corporate cash holdings: Precautionary motive or agency motive?," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 434-454.
    8. 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).
    9. Fitriya Fauzi & Abdul Basyith & Poh-Ling Ho, 2017. "Women on boardroom: Does it create risk?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1325117-132, January.
    10. Belaounia, Samia & Tao, Ran & Zhao, Hong, 2020. "Gender equality's impact on female directors’ efficacy: A multi-country study," International Business Review, Elsevier, vol. 29(5).
    11. Wang, Fangjun & Zhang, Zhichao & Ho, L.C. Jennifer & Usman, Muhammad, 2023. "CFO gender and financial statement comparability," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    12. Rigolini, Alessandra & Gabaldon, Patricia & Le Bruyn Goldeng, Eskil, 2021. "CEO succession with gender change in troubled companies: The effect of a new woman CEO on firm risk and firm risk perceived," Scandinavian Journal of Management, Elsevier, vol. 37(1).
    13. Ajay Palvia & Emilia Vähämaa & Sami Vähämaa, 2015. "Are Female CEOs and Chairwomen More Conservative and Risk Averse? Evidence from the Banking Industry During the Financial Crisis," Journal of Business Ethics, Springer, vol. 131(3), pages 577-594, October.
    14. Palvia, Ajay & Vähämaa, Emilia & Vähämaa, Sami, 2020. "Female leadership and bank risk-taking: Evidence from the effects of real estate shocks on bank lending performance and default risk," Journal of Business Research, Elsevier, vol. 117(C), pages 897-909.
    15. Wan Adibah Wan Ismail & Khairul Anuar Kamarudin & Namrata Gupta & Iman Harymawan, 2022. "Gender Diversity in the Boardroom and Corporate Cash Holdings: The Moderating Effect of Investor Protection," Risks, MDPI, vol. 10(3), pages 1-18, March.
    16. Sah, Nilesh B. & Adhikari, Hari P. & Krolikowski, Marcin W. & Malm, James & Nguyen, Thanh T., 2022. "CEO gender and risk aversion: Further evidence using the composition of firm’s cash," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    17. 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.
    18. Hanousek, Jan & Shamshur, Anastasiya & Tresl, Jiri, 2019. "Firm efficiency, foreign ownership and CEO gender in corrupt environments," Journal of Corporate Finance, Elsevier, vol. 59(C), pages 344-360.
    19. Paul McGuinness & Kevin Lam & João Vieito, 2015. "Gender and other major board characteristics in China: Explaining corporate dividend policy and governance," Asia Pacific Journal of Management, Springer, vol. 32(4), pages 989-1038, December.
    20. McGuinness, Paul B., 2021. "Board member age, stock seasoning and the evolution of capital structure in Chinese firms," International Business Review, Elsevier, vol. 30(3).

    More about this item

    Keywords

    Cash policy; CFO gender; Agency costs; Risk-aversion; Business ethics;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G40 - Financial Economics - - Behavioral Finance - - - General

    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:eee:empfin:v:55:y:2020:i:c:p:161-176. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jempfin .

    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.