TY - JOUR
T1 - Making honest men of them
T2 - institutional investors, financial reporting, and the appointment of female directors to all-male boards
AU - Lai, Karen M. Y.
AU - Khedmati, Mehdi
AU - Gul, Ferdinand A.
AU - Mount, Matthew P.
N1 - Publisher Copyright:
© 2022 Elsevier B.V.
PY - 2023/2
Y1 - 2023/2
N2 - In this paper, we theorize that dedicated institutional investors are more likely than transient institutional investors to appoint female directors to investee firms with all-male boards, particularly those with high opacity. We conjecture that dedicated investors appoint female directors as a governance mechanism to improve the financial reporting quality of these investee firms. Specifically, we find that through the appointment of female directors, dedicated institutional investors trigger the release of stockpiled negative accounting information, thereby increasing the likelihood of a stock price crash risk. We also show that dedicated investors, through the appointment of female directors, improve investee firms' corporate disclosure environment by decreasing earnings management. Finally, we find that through continued service on investee firms' boards, female directors reduce the future likelihood of a stock price crash.
AB - In this paper, we theorize that dedicated institutional investors are more likely than transient institutional investors to appoint female directors to investee firms with all-male boards, particularly those with high opacity. We conjecture that dedicated investors appoint female directors as a governance mechanism to improve the financial reporting quality of these investee firms. Specifically, we find that through the appointment of female directors, dedicated institutional investors trigger the release of stockpiled negative accounting information, thereby increasing the likelihood of a stock price crash risk. We also show that dedicated investors, through the appointment of female directors, improve investee firms' corporate disclosure environment by decreasing earnings management. Finally, we find that through continued service on investee firms' boards, female directors reduce the future likelihood of a stock price crash.
KW - Board composition
KW - Female directors
KW - Financial reporting quality
KW - Institutional investors
UR - http://www.scopus.com/inward/record.url?scp=85145551441&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2022.102334
DO - 10.1016/j.jcorpfin.2022.102334
M3 - Article
AN - SCOPUS:85145551441
SN - 0929-1199
VL - 78
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
M1 - 102334
ER -