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Market Reaction to “Bad” News: Does the CFO Gender Matter?

Fri, April 20, 3:55 to 5:35pm, Hyatt Regency Greenville, TBA

Abstract

This study examines whether investors respond to the announcement of negative news differently conditional upon CFO gender. We use auditor resignation as a proxy for negative news and use cumulative abnormal returns (CAR) following standard event study method to measure market response. We find significantly more positive (or less negative) CAR for firms with female CFOs compared to firms with male CFOs. We provide consistent evidence by using univariate as well as multivariate tests after controlling for firm fundamentals and by using three different event windows around the announcement date. These results hold for both the full and the matched-pair sample. Our study concurs with the trend of gender studies that show that gender diversity is an efficient corporate governance mechanism. As such, having females in the top executive position of a firm can be considered desirable and can mitigate the negative consequences of “bad news” like an auditor resignation.

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