Gender and corporate finance: Are male executives overconfident relative to female executives?
TL;DR: This paper examined corporate financial and investment decisions made by female executives compared with male executives and found that female executives place wider bounds on earnings estimates and are more likely to exercise stock options early.
About: This article is published in Journal of Financial Economics.The article was published on 2013-06-01. It has received 772 citations till now. The article focuses on the topics: Corporate finance & Earnings.
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TL;DR: In this paper, the authors extend the literature on how managerial traits relate to corporate choices by documenting that firms run by female CEOs have lower leverage, less volatile earnings, and a higher chance of survival than otherwise similar firms running by male CEOs, and that transitions from male to female CEOs are associated with economically and statistically significant reductions in corporate risk-taking.
884 citations
TL;DR: Wang et al. as discussed by the authors examined the effect of board gender diversity on firm performance in China's listed firms from 1999 to 2011 and found that female executive directors have a stronger positive effect on the firm performance than female independent directors, indicating that the executive effect outweighs the monitoring effect.
709 citations
TL;DR: In this paper, the authors investigate the relationship between boardroom gender diversity and firm risk, using a dynamic model that controls for reverse causality and for gender and risk being influenced by unobservable firm factors.
426 citations
TL;DR: This paper found that firms with female directors are less likely to make acquisitions and if they do, pay lower bid premia, and that each additional female director on a bidder board reduces the bid premium paid by 15.4%.
348 citations
TL;DR: In this paper, the effects of diversity in the board of directors on corporate policies and risk were examined using a multidimensional measure, and it was found that greater board diversity leads to lower volatility and better performance.
335 citations
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TL;DR: In this article, the authors randomly generate placebo laws in state-level data on female wages from the Current Population Survey and use OLS to compute the DD estimate of its "effect" as well as the standard error of this estimate.
Abstract: Most papers that employ Differences-in-Differences estimation (DD) use many years of data and focus on serially correlated outcomes but ignore that the resulting standard errors are inconsistent. To illustrate the severity of this issue, we randomly generate placebo laws in state-level data on female wages from the Current Population Survey. For each law, we use OLS to compute the DD estimate of its “effect” as well as the standard error of this estimate. These conventional DD standard errors severely understate the standard deviation of the estimators: we find an “effect” significant at the 5 percent level for up to 45 percent of the placebo interventions. We use Monte Carlo simulations to investigate how well existing methods help solve this problem. Econometric corrections that place a specific parametric form on the time-series process do not perform well. Bootstrap (taking into account the autocorrelation of the data) works well when the number of states is large enough. Two corrections based on asymptotic approximation of the variance-covariance matrix work well for moderate numbers of states and one correction that collapses the time series information into a “pre”- and “post”-period and explicitly takes into account the effective sample size works well even for small numbers of states.
9,397 citations
01 Jan 2005
TL;DR: This paper proposed quantitative definitions of weak instruments based on the maximum IV estimator bias, or the maximum Wald test size distortion, when there are multiple endogenous regressors, and tabulated critical values that enable using the first-stage F-statistic (or, for instance, the Cragg-Donald (1993) statistic) to test whether give n instruments are weak.
Abstract: Weak instruments can produce biased IV estimators and hypothesis tests with large size distortions. But what, precisely , are weak instruments, and how does one detect them in practice? This paper proposes quantitative definitions of weak instruments based on the maximum IV estimator bias, or the maximum Wald test size distortion, when there are multiple endogenous regressors. We tabulate critical values that enable using the first-stage F-statistic (or, when there are multiple endogenous regressors, the Cragg-Donald (1993) statistic) to test whether give n instruments are weak.
4,545 citations
TL;DR: Theoretical models predict that overconedent investors trade excessively as mentioned in this paper, and they test this prediction by partitioning investors on gender by analyzing the common stock investments of men and women from February 1991 through January 1997.
Abstract: Theoretical models predict that overconedent investors trade excessively We test this prediction by partitioning investors on gender Psychological research demonstrates that, in areas such as enance, men are more overconedent than women Thus, theory predicts that men will trade more excessively than women Using account data for over 35,000 households from a large discount brokerage, we analyze the common stock investments of men and women from February 1991 through January 1997 We document that men trade 45 percent more than women Trading reduces men’s net returns by 265 percentage points a year as opposed to 172 percentage points for women It’s not what a man don’t know that makes him a fool, but what he does know that ain’t so Josh Billings, nineteenth century American humorist It is difecult to reconcile the volume of trading observed in equity markets with the trading needs of rational investors Rational investors make periodic contributions and withdrawals from their investment portfolios, rebalance their portfolios, and trade to minimize their taxes Those possessed of superior information may trade speculatively, although rational speculative traders will generally not choose to trade with each other It is unlikely that rational trading needs account for a turnover rate of
3,292 citations
TL;DR: In this paper, the authors investigate whether and how individual managers affect corporate behavior and performance and show that managers with higher performance effects receive higher compensation and are more likely to be found in better governed environments.
Abstract: This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-e rm matched panel data set which enables us to track the top managers across different e rms over time. We e nd that manager e xed effects matter for a wide range of corporate decisions. A signie cant extent of the heterogeneity in investment, e nancial, and organizational practices of e rms can be explained by the presence of manager e xed effects. We identify specie c patterns in managerial decision-making that appear to indicate general differences in “ style” across managers. Moreover, we show that management style is signie cantly related to manager e xed effects in performance and that managers with higher performance e xed effects receive higher compensation and are more likely to be found in better governed e rms. In a e nal step, we tie back these e ndings to observable managerial characteristics. We e nd that executives from earlier birth cohorts appear on average to be more conservative; on the other hand, managers who hold an MBA degree seem to follow on average more aggressive strategies.
3,245 citations
TL;DR: This paper found that female directors have better attendance records than male directors, male directors have fewer attendance problems the more gender-diverse the board is, and women are more likely to join monitoring committees.
3,003 citations