Study: Female CFOs mean less tax evasion

Private equity senior executives, portfolio company boards and others in firm management roles would be wise to include more female members in senior positions, research suggests. According to a new study published by researchers at Wake Forest University and University of North Carolina, Wilmington, gender may play an important role in preventing corporate tax evasion.

The study conducted 4,674 observations of firms from 1991 to 2011, including 309 observations in the finance, insurance and real estate sector. Results show that female CFOs are less likely to evade taxes than their male counterparts.

Furthermore, firms are less prone to tax evasion when both the CFO and one board member are female. Conversely, results show that if the CFO is male, female presence on the board can lead to more tax evasion. When the board consists of all male directors, CFO gender does not have an effect on tax avoidance.

Results also show that boards with a better balance of men and women had fewer violations with the US Securities and Exchange Commission (SEC) and were generally more transparent in their finances.

“This study should be of interest to investors, auditors, and creditors as evidence that the gender of the CFO and the board should be considered when making investment-related decisions and evaluating the ethicality of a firm,” the research noted. “In addition, results that women make more ethical corporate tax decisions should be of interest to those making executive hiring decisions.”

Of the finance, insurance and real estate firms studied, only 6.5 percent had female CFOs. The proportion was in line with the results of the overall study, in which 6.6 percent of the firms had female finance chiefs.