Investors appear to put slightly more stock in positive earnings call talk from female CFOs, possibly because women executives are typically more verbally conservative than men, according to a recent study. 

Women executives tend to give shorter, less upbeat and clearer presentations, and include more numbers and fewer euphemisms, according to Kate Suslava of Bucknell University, one of the study’s authors. By contrast, men are less brief, on average using about 14% more words during the calls’ question and answer periods. But there’s also evidence that male executives are more likely to follow through after a positive quarter with more aggressive subsequent expansion of the company, she said. 

Investors may respond differently to the CFOs based on their gender, the study found. “If a woman uses positive words and a man uses positive words the market will react more positively overall to the woman,” Suslava said in an interview. “There is a premium put on top if the CFO is a woman.” For example, on the day of earnings calls the top group of companies in which women CFOs had optimistic outlooks saw shares rise 2.7%, compared to a 1.7% rise for companies with male CFOs who were also positive. 

The Benefits of Having a Female CFO study examined the differences in the language used by male and female CFOs by reviewing 105,514 transcripts of earnings calls for 4,988 companies from 2009 to 2019. 

Words matter

The study also found that the reward for conservative communication was not limited to gender by looking at a smaller sample of male CFOs with careful verbal behavior and finding evidence that market participants also viewed them favorably. 

Separately, the study also examined the correlation between subsequent earnings surprises and the gender of the CFO giving guidance on the calls. Suslava said it found a higher prevalence of the subsequent earnings surprises for companies with female CFOs. That suggests that either analysts are under-reacting and that the messages delivered by female CFOs was perhaps not taken as seriously as that given by male CFOs or potential flaws in the female group’s guidance.

Suslava said the findings underscore the importance of analyzing earnings calls and the implications of verbal cues and styles. For example, when an executive talks for too long on average that also can be viewed negatively by investors because it suggests they have too much to explain. “Words matter,” she said. 

The study comes as the percentage of female CEOs and CFOs both hit an all-time high last year compared with 2020, although the rise still leaves a relatively small percentage of women in C-suite seats at 6.9% and 15.1% respectively, according to a recent study.  A 2019 S&P Global report found that companies with female CEOs, CFOs were more profitable.