Gender Difference in Overconfidence and Household Financial Literacy
(with Edward R. Lawrence and Thanh Nguyen)
CONDITIONALLY ACCEPTED | Journal of Banking and Finance
BEST PAPER SEMIFINALIST | 2022 FMA
We study overconfidence related to financial knowledge among men and women within U.S. households, venturing beyond prior research confined to subsamples such as CEOs, retail investors, and older adults. By expanding our study to the broader U.S. population, we provide evidence that women, on average, exhibit greater overconfidence than men – a discrepancy largely attributable to the gender difference in financial knowledge. Our findings emphasize the instrumental role of financial literacy in mitigating overconfidence, providing a deeper understanding of the interaction between gender, overconfidence, and financial literacy. Our results carry profound implications for policy interventions and educational strategies.
Mitigating Stock Crash Risk: The Effect of Independent Board Leadership Structure
(with Edward R. Lawrence and Thanh Nguyen)
Effective board monitoring deters entrenched managers from withholding negative news, thereby preventing potential stock crashes and safeguarding shareholder wealth and confidence. We explore the potential of an independent leadership structure on corporate boards to enhance shareholder value by mitigating stock crash risk. Our analysis of S&P 1500 firms reveals a significant reduction in future stock crash risk in entities governed by independent chairpersons. This positive effect is particularly pronounced in organizations with high monitoring needs. Additionally, firms led by independent chairpersons appoint more financial experts to their audit committees, undergo fewer earnings restatements, and exhibit fewer sudden, unexpected negative earnings releases. Importantly, such firms are more likely to replace CEOs responsible for stock crashes. Our findings underscore the critical role of independent leadership in mitigating stock crash risk, bolstering the argument for its broader adoption in corporate governance.
Breaking the Binary: Examining the Relationship between Gender Identity, Overconfidence, and Risk Attitudes
(with Edward R. Lawrence)
We examine how gender identity relates to overconfidence and risk attitudes in economic decision-making using a dataset from the Financial Industry Regulatory Authority (FINRA). To capture the complexities of gender identity, we differentiate between individuals identifying as “other” and those identifying as either male or female. Nonbinary individuals exhibit significantly lower levels of overconfidence relative to individuals identifying as either male or female. The lower levels of overconfidence result from a lower self-assessment of financial knowledge rather than any meaningful difference in actual financial literacy. Moreover, individuals who identify as non-binary display a significantly lower willingness to take investment risks. These patterns persist even after controlling for variations in mental health.