Daniels adjunct faculty and EPhD grad Ceara Hintz explores the topic in new research

When it comes to accounting practices, does the gender of key decision makers have an influence on how companies report gains and losses?

Daniels College of Business adjunct faculty member and Executive PhD grad Ceara Hintz has recently completed research that proves that it does, and provides important findings to help shape the future of accounting in the United States.

Hintz, who works at Accenture and teaches financial and managerial accounting courses at Daniels, embarked on this research to explore how a CEO, CFO or audit partner’s gender affects what is known as “accounting conservatism.”

Ceara Hintz

Ceara Hintz

Hintz defines accounting conservatism as the practice of recognizing losses right away and gains gradually. An outcome of not being conservative with your accounting is overstating net assets. Previous research and media coverage have shown that overstatement has run rampant in recent years, Hintz said, which partially motivated this research.

“It isn’t transparent with shareholders,” she said. “That’s what is exciting about [this research]. It is valuable for shareholders investing in these companies to know if they are being transparent or not.”

Hintz also explored the relationship between accounting conservatism and risk aversion theory, as it indicates that females are more risk averse than males. In her research process, she hand-collected audit partner gender data from 4,997 U.S.-based public companies from 2016-2021.

She found that individuals that identify as male comprise a larger percentage of the sample: 93.66% had male CEOs and 87.61% had male CFOs. Female audit partners represented 16.89% of the sample.

Hintz’s research showed:

  • The presence of a male CEO or CFO is associated with lower accounting conservatism.
  • Accounting conservatism is higher among firms with a female audit partner.
  • The presence of a female audit partner on the engagement increases the level of accounting conservatism with the presence of male CFO.

“Lower accounting conservatism can lead to negative outcomes, and for this reason, the results of this study inform regulators and governance boards with evidence of gender differences at both the executive and audit partner levels,” Hintz wrote in her dissertation. She added that previous research shows that the increase in conservative accounting deters the overstatement of net assets and results in more transparent financial statements.

Hintz used previous research to theorize why female stakeholders might provide more conservative accounting practices, with studies showing that males are more goal-oriented while females prefer to be more democratic and communicative. Additional research indicates that females are less concerned with the profit side of auditing and are more focused on audit quality, Hintz said.

By shining a light on the importance of accounting conservatism and how gender plays a role in reporting, Hintz hopes to shape the future of the practice. She’s working to submit her research for publication to share it with a wider audience.

“Regulators should flag companies with males in all three positions because of the likelihood for overstatement,” she said of future action. “Whether its investors, shareholders, regulators or researchers, this will be valuable to know [going forward].”