Making honest men of them: institutional investors, financial reporting, and the appointment of female directors to all-male boards

Karen M. Y. Lai, Mehdi Khedmati, Ferdinand A. Gul, Matthew P. Mount

Research output: Contribution to journalArticleResearchpeer-review

14 Citations (Scopus)

Abstract

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.

Original languageEnglish
Article number102334
Number of pages21
JournalJournal of Corporate Finance
Volume78
DOIs
Publication statusPublished - Feb 2023

Keywords

  • Board composition
  • Female directors
  • Financial reporting quality
  • Institutional investors

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