As Bloomberg recently reported, female chief financial officers (CFOs) are on the rise at a time when other top executive positions remain elusive. As more women step into this crucial role, the burgeoning research on the “gender effect” has revealed intriguing implications, including findings in a new study from the Journal of Accounting, Auditing & Finance, which reveals that firms with female CFOs enjoy better bank loan contracts:
Based on recent empirical work showing that female CFOs report more conservative and high-quality accounting numbers, and are more likely to reduce the risk level of the firm, we hypothesize that as inside lenders, banks should recognize the benefits of female CFOs in reducing information risk ex ante and default risk ex post, and reward borrowers with female CFOs with more favorable loan contract terms.
Our empirical results support our hypotheses. We find that, in our sample, firms with female CFOs, on average, enjoy about 14 basis points lower bank loan prices than firms with male CFOs. In addition, loans given to female-CFO-led companies have 3.8-monthlonger maturities and are 8% less likely to be required to provide collateral when compared with loans given to male-CFO-led companies.
Click here to continue reading “The Impact of CFO Gender on Bank Loan Contracting,” published by Bill Francis of Rensselaer Polytechnic Institute, Iftekhar Hasan of Fordham University, and Qiang Wu of Rensselaer Polytechnic Institute in the January 2013 issue of the Journal of Accounting, Auditing & Finance — and don’t forget to sign up for e-alerts to stay on top of the latest finance-related research.