CFO gender in curbing CEO dominance on overpriced acquisition premiums

Abstract

Purpose

The purpose of this study is to evaluate the tempering effect of the presence of a female chief financial officer (CFO) on potentially dominant chief executive officer (CEO) behavior expressed through the overvaluing of acquisition premiums.

Design/methodology/approach

This study used Securities Data Corporation (SDC) database data over an eight-year period to analyze the relationships between CEO dominance and the acquisition premiums paid in an acquisition deal. The study also analyzes the effect of CFO gender in curbing CEO dominance in the acquisition deals. The authors employ clustered standard errors ordinary least squares (OLS) regression analysis along with robustness testing, which supports the validity of our conclusions.

Findings

The authors expect and find that as CEO dominance rises, so does the acquisition premium; however, the presence of a female CFO in such situations significantly reduces the overpayment of the acquisition premium.

Practical implications

The study findings advocate for organizational change in the form of an increased presence of female CFOs within business organizations.

Originality/value

This study contributes to the accounting literature by timely exploiting a rising trend in which female executives are expected to become more prolific. The authors’ research indicates that their entrenchment into business organizations, thereby promoting gender diversity, produces beneficial outcomes for those organizations. It also capitalizes on the specific attributes of the CEO–CFO relationship, which lends itself to particular effectiveness in the hands of female CFOs.

Citation

Grossman, A., Naaman, C. and Sahyoun, N. (2022), "CFO gender in curbing CEO dominance on overpriced acquisition premiums", Managerial Finance, Vol. 48 No. 3, pp. 373-391. https://doi.org/10.1108/MF-04-2021-0178