Does Wall Street Prefer Women CFOs?

by Liz O’Donnell (Boston)

Does Wall Street prefer female CFOs to male CFOs? While it’s unlikely the financial world will make that claim any time soon, new research out of Boston College indicates the street responds more favorably to financial moves made by companies where the CFO is a woman. David Kisgen, an assistant professor at Boston College co-authored the Gender and Corporate Finance study with Jiekun Huang a Ph.D. candidate at Boston College. The study looked at public companies with at least $500 million in assets between 1994 and 2005. Kisgen and Huang tracked CFO’s performance’s from the time they transitioned into the role and then for three years after. Kisgen wanted to conduct the CFO study because there is so little research examining whether gender plays a role in corporate decisions and there aren’t enough women CEOs to study.

The Gender and Corporate Finance study examined whether men and women differ in corporate financial decisions. What Ksigen and Huang found is that firms with female CFOs are less likely to make acquisitions and are less likely to issue debt than firms with male CFOs. Female CFOs are less likely to make significant changes to capital structure in general and reduce leverage more than male CFOs. Male capital structure decisions are as likely to move a firm toward its target leverage as those made by female CFOs. However, announcement returns are higher around acquisitions, debt offerings and equity offerings when the firm has a female CFO. The study makes the conclusions that women make different corporate finance decisions than men and that, “…the better announcement returns suggest female CFOs do a better job of maximizing shareholder value, at least along those particular dimensions.”

Paul Santinelli, a General Partner with North Bridge Venture Partners, says gender is not a factor when he evaluates a CFO. Santinelli looks at three things: domain expertise, financial experience and strong moral and ethics. As far as financial experience, Santinelli examines, “What has this person done in the rank and file to get to this position?” Morals and ethics are important to Santinelli because, “It is not too difficult screw up a good thing inside a company. Besides, CFOs usually run Operations, Human Resources and Finance. Governance and compliance issues are far more extreme than they were ten years ago.”

Santinelli’s criteria could bode well for women. Kisgen says one possible take away from the study is that female CFOS are careful and risk-averse and that the market responds favorably to the moves they do make. He says another possible take away is that women CFOS are higher quality, as they have had to overcome discriminatory hiring practices to get to a C-level position.