The impact of CFO gender on corporate overinvestment

Abstract

Prior research indicates that males and females tend to respond differently in various decision settings. Two such behavioral characteristics, risk-taking attitudes and ethical leadership, are tied to corporate financial and investment decision-making. In this study, we examine the association between CFO gender and corporate investment efficiency, specifically, the extent of firm-level overinvestment. We find that the presence of a female CFO is significantly associated with a decreased level of corporate overinvestment. Robustness checks using alternative investment measures and controlling for CFO-, CEO-, and board-level factors provide consistent support to this main finding. Consistent with prior studies, we show that female executives are more cautious and risk-averse than their male counterparts when making various corporate decisions, and thus, may be more likely to act in shareholders' best interests. Our findings highlight that gender plays a role in corporate financial and investment decision-making.