Female CFOs, Leverage and the Moderating Role of Board Diversity and CEO Power

53 Pages Posted: 18 Feb 2021

See all articles by Lisa Schopohl

Lisa Schopohl

ICMA Centre, Henley Business School, University of Reading

Andrew Urquhart

ICMA Centre, Henley Business School

Hanxiong Zhang

Sheffield University Management School

Date Written: December 18, 2020

Abstract

This paper investigates the extent to which female Chief Financial Officers (CFOs) affect corporate leverage. We examine female CFOs in UK firms and find that they significantly reduce the leverage of the firm; however, a female CFO’s ability to influence corporate leverage is moderated by the senior decision-making environment in the firm. In particular, female CFOs are more effective in reducing leverage in firms with boards that are diverse with respect to gender, nationality and age, and in firms where the Chief Executive Officer (CEO) is not overly powerful. In addition, we find that externally appointed female CFOs reduce leverage more, in line with them having less allegiances to other top managers and greater scope to deviate from existing policies. Our work contributes to the literature by examining the conditions under which gender-specific risk-taking preferences lead to observable effects on corporate outcomes.

Suggested Citation

Schopohl, Lisa and Urquhart, Andrew and Zhang, Hanxiong, Female CFOs, Leverage and the Moderating Role of Board Diversity and CEO Power (December 18, 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3751332 or http://dx.doi.org/10.2139/ssrn.3751332

Lisa Schopohl (Contact Author)

ICMA Centre, Henley Business School, University of Reading ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Andrew Urquhart

ICMA Centre, Henley Business School ( email )

University of Reading
Whiteknights
Reading, Berkshire RG6 6BA
United Kingdom

Hanxiong Zhang

Sheffield University Management School ( email )

University of Sheffield
Conduit Road
Sheffield, S10 1FL
United Kingdom

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