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Female CEOs and core earnings quality: new evidence on the ethics versus risk-aversion puzzle

Female CEOs and core earnings quality: new evidence on the ethics versus risk-aversion puzzle
Female CEOs and core earnings quality: new evidence on the ethics versus risk-aversion puzzle
The question of whether females tend to act more ethically or risk-averse compared to males is an interesting ethical puzzle. Using a large sample of US firms over the 1992-2014 period, we investigate the effect that the gender of a Chief Executive Officer (CEO) has on earnings management using classification shifting. We find that the pre-Sarbanes-Oxley (SOX) Act period was characterized by high levels of classification shifting by both female and male CEOs, but the magnitude of such practices is, surprisingly, significantly higher in firms with female CEOs than in those with male CEOs. By contrast, our results suggest that following the passage of the punitive SOX Act, classification shifting by female CEOs declined significantly, whilst it remained pervasive in firms with male CEOs. This suggests that the observable differences in financial reporting behavior between male and female CEOs seem to be because female CEOs are more risk-averse, but less more ethically sensitive than their male counterparts. The central tenets of our findings remain unchanged after several additional checks, including controlling for alternative earnings management techniques, corporate governance mechanisms, CEO and CFO characteristics and propensity score-matching.
Female CEOs, Earnings Quality, Classification Shifting
0167-4544
515–534
Zalata, Alaa Mansour
0fc2c56d-97ad-44ce-ab31-63ca335dcef6
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Aboud, Ahmed
499217c5-6255-4c82-907e-f624118dfa13
Gyapong, Ernest
9f613842-a752-4332-a8b1-8ad0ba0be4fa
Zalata, Alaa Mansour
0fc2c56d-97ad-44ce-ab31-63ca335dcef6
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Aboud, Ahmed
499217c5-6255-4c82-907e-f624118dfa13
Gyapong, Ernest
9f613842-a752-4332-a8b1-8ad0ba0be4fa

Zalata, Alaa Mansour, Ntim, Collins, Aboud, Ahmed and Gyapong, Ernest (2019) Female CEOs and core earnings quality: new evidence on the ethics versus risk-aversion puzzle. Journal of Business Ethics, 160 (2), 515–534. (doi:10.1007/s10551-018-3918-y).

Record type: Article

Abstract

The question of whether females tend to act more ethically or risk-averse compared to males is an interesting ethical puzzle. Using a large sample of US firms over the 1992-2014 period, we investigate the effect that the gender of a Chief Executive Officer (CEO) has on earnings management using classification shifting. We find that the pre-Sarbanes-Oxley (SOX) Act period was characterized by high levels of classification shifting by both female and male CEOs, but the magnitude of such practices is, surprisingly, significantly higher in firms with female CEOs than in those with male CEOs. By contrast, our results suggest that following the passage of the punitive SOX Act, classification shifting by female CEOs declined significantly, whilst it remained pervasive in firms with male CEOs. This suggests that the observable differences in financial reporting behavior between male and female CEOs seem to be because female CEOs are more risk-averse, but less more ethically sensitive than their male counterparts. The central tenets of our findings remain unchanged after several additional checks, including controlling for alternative earnings management techniques, corporate governance mechanisms, CEO and CFO characteristics and propensity score-matching.

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Accepted/In Press date: 3 May 2018
e-pub ahead of print date: 24 May 2018
Published date: 5 December 2019
Keywords: Female CEOs, Earnings Quality, Classification Shifting

Identifiers

Local EPrints ID: 420556
URI: http://eprints.soton.ac.uk/id/eprint/420556
ISSN: 0167-4544
PURE UUID: e88d160d-6a51-4cf9-9e3a-0b499c325efe
ORCID for Alaa Mansour Zalata: ORCID iD orcid.org/0000-0003-2018-4313
ORCID for Collins Ntim: ORCID iD orcid.org/0000-0002-1042-4056

Catalogue record

Date deposited: 10 May 2018 16:30
Last modified: 27 Jan 2020 13:48

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Contributors

Author: Collins Ntim ORCID iD
Author: Ahmed Aboud
Author: Ernest Gyapong

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