Are female top executives more risk-averse or more ethical? Evidence from corporate cash holdings policy

This study examines the impact of gender in the C-Suite on corporate decision making. In particular, we investigate the influence of the Chief Financial Officer (CFO)'s gender on the agency costs of free cash flow. We document that female CFOs reduce cash holdings in firms with excess cash, which should alleviate the agency conflict arising from managerial discretion. We also find that female CFOs at firms with surplus cash increase distributions to shareholders in the form of dividends. The empirical evidence also shows that the reduction in cash does not lead to suboptimal investment policies. Of the two competing hypotheses - gender-ethics hypothesis and risk-aversion hypothesis-these results are consistent with the view that female CFOs undertake more ethical but not more risk-averse decisions than their male counterparts. Our results are robust to a battery of robustness tests.