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Are Women CEOs Valuable in Terms of Bank Loan Costs? Evidence from China

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Abstract

Given that women CEOs are usually more risk averse, engage less in opportunistic behavior, and provide higher quality earnings than men CEOs, we argue that firms with women CEOs are likely to face lower operational and information risk and thus enjoy cheaper external funds. Using a large sample of Chinese A-share listed firms operating from 2006 to 2012, we find consistent evidence that Chinese banks tend to impose lower loan costs on firms with women CEOs compared to firms with men CEOs. This effect is more pronounced (1) for non-state-owned enterprises than for state-owned enterprises, (2) for firms without political connections than for firms with political connections, and (3) during non-crisis periods. We do not find any significant effects for firms with women chairpersons, CFOs, or directors.

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Notes

  1. These figures come from Catalyst, a leading non-profit organization dedicated to examining work environments to reveal gender inequities. For more details about Catalyst, see http://www.catalyst.org/.

  2. These figures come from MasterCard International’s Index of Women’s Advancement which measures women’s social and economic status according to the average labor market participation, education, management positions, and income levels. The benchmark score is 100. A score higher than 100 indicates a higher proportion of women to men; a score lower than 100 means a lower comparative proportion of women.

  3. This conclusion is cited from a speech by Georgette Tan, the general manager of public relations of MasterCard in the Asia–Pacific, Middle East, and Africa, in 2015. http://news.51credit.com/woaika/10746607.shtml.

  4. This figure comes from the China Entrepreneur Investment Club (CEIC) database.

  5. The “Big Four” wholly state-owned commercial banks are the Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC), and China Construction Bank (CCB). The three policy banks are the China Development Bank, the Export–Import Bank of China, and the Agricultural Development Bank of China (ADBC).

  6. These figures come from the China Banking Regulatory Commission.

  7. Note that this body of research does not always provide consistent findings (McCabe et al. 2006; Valentine and Rittenburg 2007). For example, Robin and Babin (1997) and Roxas and Stoneback (2004) do not find gender differences in ethical reasoning between men and women. However, because these studies usually use student sample, it is doubtful that their results are generalizable to professional populations (Loe et al. 2000).

  8. Petersen (2004) provides a highly recommended definition and description of the differences between hard and soft information.

  9. Although Sun et al. (2015) suggest that women executives and directors play a more positive role in times of economic crisis, the information is still soft and thus is less important to lenders during these periods.

  10. The independent variable (i.e., Women CEO) and three moderating variables (i.e., STATE, PC, and CRISIS) in Hypotheses 2-4 are indicator variables, so it is more reasonable to test Hypotheses 2-4 by conducting the regressions for the subsamples according to the moderating variables.

  11. Specifically, according to Altman and Hotchkiss (2006), the Z_score equals (1.2 × Working capital + 1.4 × Retained earnings + 3.3 × EBIT + 0.6 × Market value + 0.999 × Sales)/Total assets.

  12. Besides CEO gender, other CEO characteristics (e.g., age, education, and experience) may be valuable for making lending decisions. However, the data for these additional characteristics have huge missing values. Firm-year observations with such missing data are not randomly distributed and are significantly different from observations without missing data. Therefore, following Francis et al. (2013), we report the results of regression without controlling for these characteristics. Nevertheless, we still find qualitatively similar regression results after controlling for CEO age and CEO education with available data.

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Acknowledgements

We acknowledge the financial support from the Chinese National Science Funds (Grant No. 71202061, 71572160, and 71672197), Program for New Century Excellent Talents in University of Fujian Province (2015), and Program for Cultivating Outstanding Young Research Talents in University of Fujian Province (2015). All remaining errors are our own.

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  1. School of Management, Xiamen University, No. 422, Siming South Road, Xiamen, 361005, Fujian, People’s Republic of China

    Jin-hui Luo, Zeyue Huang, Xue Li & Xiaojing Lin

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  1. Jin-hui Luo
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Correspondence to Jin-hui Luo.

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Luo, Jh., Huang, Z., Li, X. et al. Are Women CEOs Valuable in Terms of Bank Loan Costs? Evidence from China. J Bus Ethics 153, 337–355 (2018). https://doi.org/10.1007/s10551-016-3369-2

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