Impact of female CFO board membership on firm investment efficiency: does institutional gender parity matter? Evidence from emerging economies

Abstract

PurposeThis study analyzes how possessing female chief financial officers (CFOs) on boards in emerging economies impacts on firm investment efficiency and addresses overinvestment and underinvestment tendencies of firms based on this aspect. The study draws from resource-based and stakeholder theories. Additionally, it explores how institutional gender parity influences this relationship.Design/methodology/approachThe study uses a two-step system generalized method of moment (GMM) estimation technique to test its hypotheses. Data span from 2010 to 2021 and cover firms in emerging economies. The approach addresses endogeneity and accounts for unobserved heterogeneity in the data.FindingsThe study’s results support the hypothesis that firms with female CFO decrease overinvestment and underinvestment tendencies, indicating improved investment efficiency. This effect is more pronounced in emerging economies with higher gender parity and support for female leadership.Practical implicationsThe study’s findings suggest fostering gender parity and female leadership in emerging economies to maximize the benefits of female CFO board membership. Policymakers should advocate for corporate governance practices and gender parity through supportive policies to advance economic outcomes and competitiveness.Originality/valueThis study advances existing literature by highlighting the positive outcomes of having female CFOs on boards in emerging economies. It emphasizes gender diversity’s importance in leadership and advocates for inclusive institutional frameworks.