CEO gender and readability of annual reports: do female CEOs’ demographic attributes matter?

Abstract

PurposeThis study examines the association between chief executive officer (CEO) gender and the readability of annual reports by considering some demographic attributes of female CEOs.Design/methodology/approachOrdinary least squares (OLS) regression is used to test the research hypotheses on a sample of S&P 500 firms between 2004 and 2016.FindingsThe results show that female CEOs are significantly positively associated with the readability of 10-K reports – in line with ethical-sensitivity theory. Further results show that this association is variable depending on the demographic attributes of female CEOs – in line with upper echelon theory. Specifically, older female CEOs and those with financial expertise are significantly associated with more readable 10-K reports. In contrast, female CEOs hired from within the firm are negatively associated with the readability of 10-K.Research limitations/implicationsThis study provides evidence on the effect of female CEOs and their demographic attributes on annual report readability, which was not addressed in prior research.Practical implicationsThe findings show that the appointment of female CEOs seems like a helpful avenue to reduce concerns among the regulators about the textual complexity of annual reports. However, the most important policy implication of the study is that the decision to appoint female CEOs should be based more on their demographic attributes than on gender equality recommendations and full trust in women's behavioral consequences.Originality/valueThis study contributes to the academic literature on readability and gender. Prior research has not clarified which attributes and skills of female CEOs drive their abilities to improve shareholder value and make more ethical decisions. This study suggests that female CEOs are not better “per se” to improve corporate governance practices, and the impacts of female CEOs are not the same and differ according to their demographic attributes.

الدور المُعدل للمنافسة فى سوق المنتج على العلاقة بين القدرة الإدارية وقابلية التقارير المالية للقراءة(باللغة الانجليزية)

“…Additionally, managerial ability may be determined by several characteristics. According to Gosselin et al (2021) and Sahar et al (2022) these characteristics, such as skills or expertise, gender, motivations, and the objective of the reports, could influence the level of readability. A business education background can also affect their firm's policies and strategies by providing top executives with professional financial reporting knowledge and training them in business ethics for communicating financial information (Tuo et al, 2019).…”

“…More specifically, female CEOs, especially older female CEOs, are significantly positively associated with readability, because of their distinctive characteristics, such as risk aversion, strengthened governance, and ethical behavior that reduce opportunistic behavior. (Sahar et al, 2022). The political connections can weaken the impact of management ability on the probability of fraud by reducing firms' financial pressure (Wang et al, 2017).…”

CEO overconfidence and financial reporting complexity: evidence from textual analysis

“…Additionally, this research stands out by leveraging advanced textual analysis techniques tailored to the Persian language and applied to Iranian annual financial statements – a pioneering approach in this specific context. In doing so, it bolsters existing studies on readability within the Iranian market (Hesarzadeh and Rajabalizadeh, 2019, 2020; Hesarzadeh et al ., 2020) and complements international explorations that investigate the interplay between managerial traits and financial statement readability (Hasan, 2020; Sun et al ., 2022; Xu et al ., 2018; E-Vahdati et al ., 2022). While prior research has predominantly focused on facets such as board gender diversity (Ginesti et al ., 2018; Nadeem, 2021) and the presence of women in senior executive positions (E-Vahdati et al ., 2022) to gauge their impact on 10-K report readability, this study offers a fresh perspective.…”

“…In doing so, it bolsters existing studies on readability within the Iranian market (Hesarzadeh and Rajabalizadeh, 2019, 2020; Hesarzadeh et al ., 2020) and complements international explorations that investigate the interplay between managerial traits and financial statement readability (Hasan, 2020; Sun et al ., 2022; Xu et al ., 2018; E-Vahdati et al ., 2022). While prior research has predominantly focused on facets such as board gender diversity (Ginesti et al ., 2018; Nadeem, 2021) and the presence of women in senior executive positions (E-Vahdati et al ., 2022) to gauge their impact on 10-K report readability, this study offers a fresh perspective. It delves deeper into assessing the influence of the CEO's intangible attributes on financial reporting complexity.…”

Top management characteristics and comprehensive focus on budgeting

“…Literature review and hypothesis development 2.1 The upper echelons perspective Top management characteristics have been recognized as essential amongst firms' choices (Carpenter et al, 2004;Shen, 2021). Despite some criticism (Abernethy and Wallis, 2018;Neely et al, 2020), scholars from many disciplines, such as strategic management (Hambrick and Mason, 1984;Nielsen, 2010), financial accounting (E-Vahdati et al, 2023;Ge et al, 2011;Pl€ ockinger et al, 2016), corporate social responsibility and management accounting and control (Abernethy et al, 2010;Bobe and Kober, 2018;Hiebl, 2014;Jukka, 2021Jukka, , 2023Reheul and Jorissen, 2014), have engaged in the analysis of upper echelons, finding that top managers exert significant influence over a range of decisions.…”