Do female CEOs really promote investment efficiency?

This study examines whether female CEOs moderate the relationship between accrual-based earnings management (EM) and corporate investment efficiency. Using panel data on 267 French firms listed on the CAC All Shares index over 2011–2022 (3,204 firm-year observations), we assess whether firms led by women exhibit different patterns of overinvestment and underinvestment. Our findings suggest that the positive association between accrual-based EM and overinvestment is weaker in female-CEO firms, consistent with capital discipline. However, the interaction between female CEOs and EM is positively associated with the magnitude of underinvestment among underinvesting firm-years, suggesting a more cautious investment pattern when reporting opacity is high. Our results also suggest that board diversity, reflected by gender diversity, cultural diversity and soft-skills heterogeneity, is associated with a weaker relationship between EM and investment inefficiency, suggesting a complementary governance role. This study underscores the governance (G) dimension of ESG and its implications for sustainable corporate investment policies.