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At the risk of setting off a corporate war between the sexes, I feel compelled to report the findings of a new study that shows women are more trustworthy than men in reporting companies' financial results. Come to think of it, the findings are in line with the general impression I've gotten that the distaff sex is better than its counterpart at financial regulation. After all, current and former financial cops like Sheila Bair, Mary Schapiro, Elizabeth Warren and Brooksley Born have all been stronger exponents of probity and rectitude here than any of the males that have occupied their roles or similar ones at or around the same time. And the study leads to a similar conclusion when it comes to how companies' report their results. The research, published in the current issue of the American Accounting Association journal, Accounting Horizons, found that women were significantly less aggressive than men in reporting accruals, or estimates of the incurred cost of non-cash items, which range from short-term ones such as accounts receivable and inventory to longer-term items like pension liabilities or property, plant, and equipment. The researchers, Abhijit Barua, Lewis F. Davidson and Dasaratha V. Rama of Florida International University and Sheela Thiruvadi of Morgan State University, concluded that companies with female CFOs have "a higher quality of accruals." The findings were based on data reported for 2004 and 2005 by firms listed in the 2006 edition of the Corporate Library database. With no universally agreed-upon way of calculating abnormal accruals, the authors used four different models, while controlling for a variety of factors likely to affect accruals, including companies' size, growth rate, return on assets and cash flow. Under each model, female CFOs were associated with lower "abnormal" accruals than male CFOs, with the likelihood that these results were due to chance ranging from about one in a thousand (under one model) to about one in a hundred (two models) to about one in 20 (one model). In other words, the differences between male and female CFOs ranged, depending on the accrual model employed, from statistically significant to highly significant, the researchers said. They also found that whether a CEO was male or female had little or no effect on abnormal accruals and that firms' accrual quality improved when a woman succeeded a man as CFO, the improvement being statistically significant with three of the four accrual models employed in the study. In a statement accompanying the release of the data yesterday, Barua said the research was consistent with other studies showing that female CFOs were more financially conservative than men. "A number of studies have shown women to be less aggressive or more cautious than men in a variety of financial decisions," he said. "In addition, female CFOs have been found to be more cautious in evaluating company acquisitions and in issuing debt. Such evidence led us to hypothesize that firms with female CFOs would have higher accrual quality than companies with male CFOs, and this clearly turns out to be the case." Yet the survey also found that female CFOs accounted for only 8 to 9 percent of the sample of 1,448 firms in 2005 and 1,174 firms in 2004. The researchers went on to say this shows that hiring more women as CFOs would help restore more integrity to the financial system. Of course, skeptics might point to the example of Erin Callan, the former CFO of Lehman Brothers who was singled out for criticism by the bankruptcy examiner's report for helping to hide the bank's debt, as evidence that such a conclusion is hardly air-tight. But Callan might be an exception that proves the rule. As my colleague Steve Taub pointed out yesterday, Callan wasn't an accountant by training, but a tax lawyer.
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