Female CEOs and Core Earnings Quality: New Evidence on the Ethics Versus Risk-Aversion Puzzle

47 Pages Posted: 1 Jun 2018

See all articles by Alaa Zalata

Alaa Zalata

University of Southampton - Southampton Business School

Collins G. Ntim

University of Southampton Business School, UK; University of Southampton

Ahmed Aboud

University of Portsmouth - Portsmouth Business School, Students

Ernest Gyapong

Massey University

Date Written: May 18, 2018

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.

Suggested Citation

Zalata, Alaa and Ntim, Collins G. and Aboud, Ahmed and Gyapong, Ernest, Female CEOs and Core Earnings Quality: New Evidence on the Ethics Versus Risk-Aversion Puzzle (May 18, 2018). Journal of Business Ethics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3180691

Alaa Zalata (Contact Author)

University of Southampton - Southampton Business School ( email )

SO17 1TR
United Kingdom

Collins G. Ntim

University of Southampton Business School, UK ( email )

Southampton Business School
Highfield
Southampton, England SO17 IBJ
United Kingdom
+44 (0) 238059 4285 (Phone)
+44 (0) 238059 3844 (Fax)

HOME PAGE: http://www.southampton.ac.uk/business-school/about/staff/cgn1n11.page

University of Southampton ( email )

Southampton, SO17 1BJ
United Kingdom

Ahmed Aboud

University of Portsmouth - Portsmouth Business School, Students ( email )

Portsmouth
United Kingdom

Ernest Gyapong

Massey University ( email )

Private Bag 11 222
Palmerston North, Manawatu 4442
New Zealand

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