Women Executives and Corporate Investment: Evidence from the S&P 1500
In this paper, we examine the gender effect of top executives on corporate investment decisions. Malmendier and Tate (2005) provide a theoretical argument and empirical evidence to show that the corporate investment of overconfident CEOs is significantly more sensitive to cash flow, particularly in equity-dependent firms. Social Psychology and behavioral finance literature suggest that men in general are more overconfident than women. Using gender as a measure of relative overconfidence, we hypothesize that corporate investment of female executives should be less responsive to cash flow than corporate investment of male executives, especially among equity-dependent firms. Using the executive gender data set from the S&P 1500, we find that the evidence is consistent with our hypotheses.
Executive Overconfidence and Reporting Conservatism: Evidence from the S&P 1500
In this paper, we examine the effect of top executives’ overconfidence on financial reporting. Traditionally, there are a number of explanations for the source of conservative reporting, such as contracting, litigation, taxation and regulatory explanations. No evidence so far shows that managers’ behavior such as overconfidence could be another explanation for conservative reporting. The evidence from social psychology and behavioral finance literature indicates that men are more overconfident than women, especially in financial matters. Thus, we use gender as a measure of relative overconfidence, and hypothesize that financial reporting is more conservative in firms with female top executives than in firms with male top executives, after controlling for traditional explanations of conservative reporting. Using executive data from the S&P 1500, we examine a number of measures of reporting conservatism. We find our hypothesis is supported in all conservatism measures. Especially, firms with a female CFO show significant higher levels of conservatism than firms with a male CFO during the same period, and the role of the CEO is less influential in conservatism reporting than that of the CFO.