How do Female Managers or Board Members Affect Corporate Credit Ratings?
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Abstract
Using credit ratings of Taiwan listed firms from 2011 to 2018 as sample, this paper tries to investigate whether managers’ gender and board gender diversity affect credit rating determinants. In addition, this paper considers three behavioral variables to investigate whether they are the factors for gender influences on credit ratings, including overconfidence, conservative accounting principles and earnings quality. The research shows the following results. First, firms with female managers tend to be assigned better credit ratings. Second, the higher percentage of female boards is detrimental to ratings. However, the firm is assigned a better rating when the percentage is more than a particular point, suggesting the relationship between female board percentages and ratings is U-shaped. Third, firms with female managers tend to reduce managers’ high debt-financing’ overconfidence behavior and make firms be assigned better credit ratings. Fourth, firms with more than 40% female boards tend to reduce managers’ overinvestment’ overconfidence behavior or have better earnings quality and make firms be assigned better credit ratings.
