Not Just CEOs: Having a Woman CFO Also Benefits Companies - Building Gender Balanced Business

• Readers of this site already know that women in charge tend to generate better returns for investors, but now comes proof that having a woman as CFO in particular has that effect, but for very specific reasons.

• The unpublished study, co-written by Darren Kisgen, a Boston College assistant professor, and Jiekun Huang, a Ph.D. candidate at the school, was summarized by CFO.com.

• Research shows that a company’s share price fares better when an acquisition is announced or a secondary equity offering is made if the firm has put a woman in charge of its finances.

• Having a woman as a CFO clearly curbs acquisition binges, which tends to benefit a stock overall, as acquiring companies usually do not see a long-term share gain related to takeovers or mergers.

• At 73 big US companies that replaced a male CFO with a woman for at least four years, average growth in assets was 17% lower than at the average of 500 similar companies with men as CFOs.

• But when they did green-light deals, shares of the companies with women in charge of finances did better: Stock-price reaction to deals was about 2% better.

• In secondary equity offerings, the difference also was 2% in favor of companies with women as CFO.

• Kisgen pointed out that the difference translated into a 95% confidence level that the results were definitively the result of the gender of the CFO.

• In case you wondered how much a mere 2% matters, note that all of the companies involved had book assets exceeding $500 million.

• Female CFOs issued 13% less debt but also retired less outstanding debt than men, so net leverage was largely the same among companies with male and female CFOs.

• The study did not address overall stock returns among the companies, as the authors deemed that too many variables besides the gender of the CFO affected share prices outside of deal windows.

• The authors concluded: “The evidence suggests that female CFOs on average do make decisions which are better for overall shareholder value.” Kisgen added: “The market seems to be taking something from the gender of the executive. I don’t know for sure what that is, but relying on previous literature it seems that the risk-aversion and over-confidence arguments are reasonable and consistent with what we find empirically.”

• Oddly, Kisgen told CFO.com that the authors were first planning to study the differences between male and female CFOs — but that there are too few women in the role to complete a viable study.

The CFO.com article