Female CEOs and investment efficiency: evidence from an emerging economy

• Published in: Pacific accounting review Vol. 32; no. 4; pp. 443 - 474
• Main Authors: Ullah, Irfan, Majeed, Muhammad Ansar, Fang, Hong-Xing, Khan, Muhammad Arif
• Format: Journal Article
• Language: English
• Published: Palmerston North Emerald Publishing Limited 11.12.2020; Emerald Group Publishing Limited
• Subjects: Adverse selection; Asymmetry; Boards of directors; Chief executive officers; Consolidation; Corporate governance; Decision making; Efficiency; Emerging markets; Females; Financial reporting; Hypotheses; Investments; Leadership; Net present value; Resource efficiency; Stock prices; Stockholders; Pakistan; Financial reporting quality; G31; FCEOs; Investment efficiency; Under/overinvestment; J16; P31
• ISSN: 0114-0582; 2041-5494
• DOI: 10.1108/PAR-08-2019-0099

Purpose This study aims to investigate how the presence of female CEOs (FCEOs) affects investment efficiency in emerging economy, where female participation in business activities is limited. Design/methodology/approach This paper investigates the impact of CEO gender on investment efficiency by using investment efficiency measures proposed by Biddle et al. (2009), Chen et al. (2011) and Chen et al. (2013). Findings The findings suggest that FCEOs are associated with high level of investment efficiency. FCEOs improve corporate governance, streamline management and reduce inefficient investment decisions. In addition, FCEOs focus more on curbing underinvestment than overinvestment when making investment decisions. Furthermore, high financial reporting quality (FRQ) strengthens the effect of FCEOs on investment efficiency. The results suggest that FCEOs do not ameliorate the investment efficiency of state-owned enterprises. Originality/value This study enhances our understanding of the effects of FCEOs on corporate investment decisions in a male-dominated society. Efficient use of resources is vital from corporate and societal perspectives. Emerging economies are characterized by the unstable political and economic environment and low participation of females in decision-making. Hence, these economies require efficient utilization of resources. This study also sheds light on the role of FCEOs in curtailing underinvestment in emerging economies. It proves that FRQ is important in emerging economies because it strengthens the governance role of FCEOs.