Masculinity, Testosterone, and Financial Misreporting

Abstract

We examine the relation between a measure of male CEOs’ facial masculinity and financial misreporting. Facial masculinity is associated with a complex of masculine behaviors (including aggression, egocentrism, riskseeking, and maintenance of social status) in males. One possible mechanism for this relation is that the hormone testosterone influences both behavior and the development of the face shape. We document a positive association between CEO facial masculinity and various misreporting proxies in a broad sample of S&P1500 firms during 1996–2010. We complement this evidence by documenting that a CEO's facial masculinity predicts his firm's likelihood of being subject to an SEC enforcement action. We also show that an executive's facial masculinity is associated with the likelihood of the SEC naming him as a perpetrator. We find that facial masculinity is not a measure of overconfidence. Finally, we demonstrate that facial masculinity also predicts the incidence of insider trading and option backdating.

CFO Narcissism and Financial Reporting Quality

“…Because our signature size measure might be capturing testosterone levels (Jia, van Lent, and Zeng []), we also obtained the facial width‐to‐height ratios for our subjects . Photographs were available for 62 of the 63 participants.…”

“…Because Jia, van Lent, and Zeng [] suggest a link between misreporting and testosterone as measured by facial width‐to‐height ratios, we also obtain these measurements from our participants’ digital student identification images to examine the relationship between facial ratios and our key variables of interest.…”

“…Consistent with Jia, van Lent, and Zeng [], the facial width‐to‐height ratio is defined as the horizontal distance between the widest point of the cheeks scaled by the vertical distance from the upper lip to the upper edge of the eye.…”

Gender diversity on boards and forward-looking information disclosure: evidence from Jordan

“…Similarly, Gul et al (2011a) examined whether the gender of directors affects fully independent audit committees' ability to constrain earnings management and thus their effectiveness in overseeing the financial reporting, finding that the proportion of females on the audit committee is not associated with earnings management. Jia et al (2014) investigated the relationship between the facial structure of CEOs and their companies' financial misreporting, and the results showed that companies with CEOs who have more masculine faces have a higher incidence of financial misreporting. Recent studies by Ho et al (2015) and Thankom et al (2015) found that female directors tend to adopt more restrained earnings management, reflecting an inclination towards more conservative accounting policies, and a more conservative mind-set among female CEOs characterised by a tendency to be less aggressive.…”

Face shape and behavior: Implications of similarities in infants and adults

“…Men with relatively broader faces scored higher on laboratory and real-world measures of aggressiveness (Carré, McCormick, & Mondloch, 2009; Carré & McCormick, 2008) and cheating (Jia, Van Lent, & Zeng, 2015; Haselhuhn & Wong, 2012; Stirat & Perrett, 2010). Broader faces further predicted men’s dominance (Mileva, Cowan, Cobey, Knowles, & Little, 2014), US Presidents’ achievement drive (Lewis, Lefevre, & Bates, 2012), performance during negotiation tasks (Haselhuhn, Wong, Ormiston, Inesi, & Galinsky, 2012), and CEOs’ corporate success (Wong, Ormiston, & Haselhuhn, 2011).…”