Women CFOS Are Outperforming Men — And The Specifics May Surprise You

Before she began her academic career, Kate Suslava worked as an auditor for accounting giant EY and later, for Hearst. She noticed that at the finance world’s entry level, women are fairly well-represented—“pretty much 50/50,” she says. “But as you go up the ladder, there are fewer and fewer women. And the ones who remained were getting evaluated differently than men when it comes to promotions and bonuses.”

When Suslava, now a professor at Bucknell University’s Freeman College of Management, began her PhD studies, she saw an opportunity to combine her undergraduate degree in linguistics with her MBA in accounting and really parse the differences in how men and women communicate. Her groundbreaking research, which analyzed transcripts from more than 105,000 earnings calls of nearly 5,000 publicly traded companies, found that female CFOs tend to be more concise and less optimistic, are clearer in their language and use fewer cliches or idioms, and provide more numbers in their speech than men. Those differences particularly stand out in the spontaneous Q&A sections of earnings calls, which tend to be more off-the-cuff and less scripted, and “are reflected in stronger market and analyst reactions,” Suslava says.

“Going in, I wasn’t sure I’d find differences, because by the time a woman gets to a position like that they’ve been sort of conditioned to speak and behave a certain way,” Suslava says. “My hypothesis was that at this executive level there will be no gender differences because of how much training and coaching they go through, especially for these (earnings) calls. But I was surprised to see all these differences come out in the Q&A section, which is more spontaneous. Language reveals so much about us—it’s really a look inside our brain.”

Suslava and her co-authors, Professors Julia Klevak and Joshua Livnat, measured CFO behavior across five metrics, including the length of their presentation, their tone and sentiment, complexity of speech, the level of obfuscation using euphemisms or clicks, and the proportion of numbers cited. Their analysis revealed significant differences in how CFOs of different genders communicate during quarterly earnings calls: “Female CFOs typically give shorter, less upbeat, and clearer presentations; they also tend to use less obfuscation and more numbers than male CFOs,” the authors say. “Our findings seem to indicate that female CFOs are more conservative in their investor communication than male CFOs.”

And moreover, “at the time of the call, investors react more strongly to the tone of female CFOs than to the tone of their male peers,” they say. “The tone of female CFOs is more strongly associated with next-quarter earnings surprises, which measure how much actual firm earnings deviate from the analyst forecasts. These findings contribute to the growing body of evidence that women are evaluated differently from their male counterparts.”

The research also counted how many times CFOs would reference a number when they replied to a question on earnings calls. And “across all CFOs, when I separate by gender, women tend to illustrate their answer with more numbers,” Suslava says. “Men are more prone to sort of waffling their way out. But women have to be more prepared.”

Suslava and her colleagues focused on two measures of complexity: “fog,” or how many words per sentence CFOs used, and how many times CFOs used words with more than three syllables, which tend to be harder to understand.

“If you want listeners to understand more clearly, you talk in shorter sentences and you use more direct language,” she says. “You avoid long technical words and legalese.”

Suslava’s research is the latest in a slew of robust academic studies lending support to the idea that firms with women in their top financial roles perform better and generate stronger returns than those run by men. Research from the University of Alabama finds that companies with women in the CFO seat are less likely to misreport financial data. The stock prices of companies with women in CFO positions tend to outperform the market average, according to an S&P Global study, with profitability growing by 6% and stock returns ticking up 8% in the 24 months following appointment of a woman in the role. That study, which spanned 17 years, found that companies with women in the top finance roles churned out an additional $1.8 trillion in gross profit than their sector average. Another BCG study has also found a significant correlation between the diversity of management teams and overall innovation, with companies reporting above-average diversity on their management teams also reporting innovation revenue that was 19 percentage points higher than that of companies with below-average leadership diversity.

“I think a lot of this really comes down to an ability and desire to actively listen,” says Stephanie Wiggins, managing director and head of production for agency lending with PGIM Real Estate. “We’re great perspective takers and solve problems and communicate with empathy. And while there are plenty of men out there who do it—I work for one who is a great listener—unfortunately it’s just not the norm across the board.”

Despite this growing body of research, however, women still remain underrepresented in top finance roles. According to another study from BCG, women hold just one-third of all senior finance positions and 13% of CFO roles. The study says several root causes are to blame, including “an insufficient leadership commitment to diversity, absence of role models, and a lack of inclusiveness.”

“To capture these benefits, it is imperative that companies increase the share of women in finance leadership positions and give junior employees better exposure to them as role models,” note the study’s authors, Anna Oberauer, Juliet Grabowski and Alexander Roos. “This requires new initiatives that promote not only the recruitment of women but also their retention and advancement. To sustain the improvements, companies must embed gender diversity in the organization’s culture. Given their mandate to improve corporate performance and lead transformations, current CFOs can play a crucial role in designing and accelerating these efforts.”

In addition, most CFOs are what BCG analysts call “homegrown” and promoted into the role from elsewhere within the company. But “companies seem to be more open to bringing in women CFOs as external hires, which may reflect an absence of candidates within the company,” they say. About 37% of female CFOs globally were externally hired versus 27% of male CFOs. Globally, approximately 37% of women CFOs were externally hired, versus approximately 27% of men CFOs.

“The reality is, it’s harder for women to advance—so women who have advanced have really worked incredibly hard to get there,” says Lisa Hurd, Chief Investment Officer at The RADCO Companies. “There’s no room for mediocre women—and there’s something exceptional about the ones at the top.”

When she’s hiring for her team, Hurd says she’s always looking for clues to how a candidate will react “when things go sideways.”

“I’m always interested to hear how people have approached situations where things haven’t gone entirely according to plan,” she says. “Were you doing deals when the market was going sideways and the Treasury was moving 10 bps every other day? I’m more interested in what shows me you can be flexible when things aren’t going according to plan.”