Female CFOs, Earnings Quality, and the Cost of Capital: Evidence from Indonesian Listed Firms (2015–2024)

https://doi.org/10.35912/ahrmr.v5i4.3779
Published: Dec 31, 2025

Abstract:

This study examines whether female chief financial officers (CFOs) improve earnings quality and reduce the cost of capital in Indonesian listed firms, and whether earnings quality mediates the relationship between female CFO presence and financing costs. Using an unbalanced firm-year panel of non-financial companies listed on the Indonesia Stock Exchange for 2015–2024, the analysis employs fixed-effects regressions with year effects to control for unobserved time-invariant firm heterogeneity and common macro shocks. Earnings quality is primarily measured using accrual quality based on the Dechow–Dichev accrual estimation error framework, with absolute discretionary accruals as a robustness proxy. The cost of capital is operationalized using the cost of equity (CAPM-based), cost of debt, and an integrated measure (WACC). Results indicate that female CFO presence is associated with significantly higher earnings quality, reflected in lower accrual estimation error and lower absolute discretionary accruals. Consistent with information-risk pricing, poorer earnings quality is positively associated with higher costs of equity, debt, and overall capital. Mediation tests using bootstrap confidence intervals show that earnings quality partially mediates the relationship between female CFO presence and the cost of capital, while a remaining direct effect, particularly for equity-related outcomes, suggests an additional governance credibility or signaling channel beyond accounting-based earnings-quality measures. Robustness checks using alternative standard error structures, alternative earnings-quality proxies, and lagged specifications yield consistent inferences. Overall, the findings highlight the CFO as a micro-foundation of reporting credibility and suggest that financial leadership and reporting discipline can function as a cost-of-capital strategy in emerging markets characterized by heterogeneous disclosure and concentrated ownership.

Keywords:
1. Cost of Capital
2. Cost of Debt
3. Cost of Equity
4. Discretionary Accruals
5. Earnings Quality
6. Female CFO
Authors:
1 . Jubery Marwan
Universitas Prof. Dr. Moestopo (Beragama), Jakarta, Indonesia
2 . Meiliyah Ariani
Universitas Prof. Dr. Moestopo (Beragama), Jakarta, Indonesia
3 . Aji Yoga Sekar
Sekolah Tinggi Ilmu Kepolisian, Jakarta, Indonesia
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How to Cite
Marwan, J., Ariani, M., & Sekar, A. Y. (2025). Female CFOs, Earnings Quality, and the Cost of Capital: Evidence from Indonesian Listed Firms (2015–2024). Annals of Human Resource Management Research, 5(4), 401–417. https://doi.org/10.35912/ahrmr.v5i4.3779
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Vol. 5 No. 4 (2025): December
Articles
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References

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    Arinto, A. D., Sitanggang, D. H., Syauqi, M. F., & Fahlevi, M. (2025). The role of time pressure, behavioral control and human interaction in shaping e-commerce continuance intention across product categories in Indonesia. Journal of Electronic Business & Digital Economics, 1-23. doi:https://doi.org/10.1108/JEBDE-11-2024-0049

    Bankole, M., Bodjrènou, S., Honfo, F., Codo, G., Bodecker, J., Termote, C., . . . Hounkpatin, W. A. (2023). Valorization of Vigna radiata (l.) Wilczek. and Moringa oleifera to Improve Food Recipes of 6-23-Month-Old Children in Northern Benin. Journal of Agriculture and Food Research, 13, 1-10. doi:https://doi.org/10.1016/j.jafr.2023.100639

    Barua, A., Davidson, L. F., Rama, D. V., & Thiruvadi, S. (2010). CFO gender and accruals quality. Accounting horizons, 24(1), 25-39. doi:https://doi.org/10.2308/acch.2010.24.1.25

    Betarqi, B. B., & Yunanto. (2024). Penafsiran Hukum Mengenai Kewenangan Notaris dalam Membuat Akta Pertanahan. 2024, 17(2), 683-694. doi:https://doi.org/10.14710/nts.v17i2.48669

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    Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. Accounting review, 193-225.

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    Hamsal, H., Nurman, N., Hamzah, Z., Arif, M., & Sukri, A. (2025). Work environment as mediator between workload and health worker performance. Annals of Human Resource Management Research, 5(4), 107-120. doi:https://doi.org/10.35912/ahrmr.v5i4.3300

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    Karsudjono, A., Kadir, A., Ritawaty, N., Fatih, H. M., & Audah, A. (2025). The role of workforce diversity in shaping employee inclusion in organizations. Annals of Human Resource Management Research, 5(4), 281-299. doi:https://doi.org/10.35912/ahrmr.v5i4.3459

    Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of accounting and economics, 39(1), 163-197. doi:https://doi.org/10.1016/j.jacceco.2004.11.002

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    Lintner, J. (1975). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets Stochastic optimization models in finance (pp. 131-155): Elsevier.

    Nugroho, A. J. S., Marjukah, A., Setyawanti, D., Haris, A., Almasitoh, U. H., & Tasari, T. (2025). A model of student smoking cessation behavior based on pictorial health warnings as an intervening variable. Annals of Human Resource Management Research, 5(4), 1-14. doi:https://doi.org/10.35912/ahrmr.v5i4.3205

    Peni, E., & Vähämaa, S. (2010). Female executives and earnings management. Managerial finance, 36(7), 629-645. doi:https://doi.org/10.1108/03074351011050343

    Said, M., Setiawan, L., Darmono, D., Paris, A., Sultan, S., & Fahlevi, M. (2025). Exploring factors influencing actual usage of freight forwarding services in Indonesia: A study on desire, outcome expectations, perceived self-efficacy and moderating roles of delivery risk and perceived trust. Decision Science Letters, 14(1), 179-192.

    Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The journal of finance, 19(3), 425-442. doi:https://doi.org/10.1111/j.1540-6261.1964.tb02865.x

  1. Ameer, W., Aziz, A. L., Ali, M., Fahlevi, M., & Propheto, A. (2025). The Role of Institutional Quality in Chinese Outward Foreign Direct Investment and Domestic Investment’s Impact on Economic Stability. Economies, 13(12), 344. doi:https://doi.org/10.3390/economies13120344
  2. Arinto, A. D., Sitanggang, D. H., Syauqi, M. F., & Fahlevi, M. (2025). The role of time pressure, behavioral control and human interaction in shaping e-commerce continuance intention across product categories in Indonesia. Journal of Electronic Business & Digital Economics, 1-23. doi:https://doi.org/10.1108/JEBDE-11-2024-0049
  3. Bankole, M., Bodjrènou, S., Honfo, F., Codo, G., Bodecker, J., Termote, C., . . . Hounkpatin, W. A. (2023). Valorization of Vigna radiata (l.) Wilczek. and Moringa oleifera to Improve Food Recipes of 6-23-Month-Old Children in Northern Benin. Journal of Agriculture and Food Research, 13, 1-10. doi:https://doi.org/10.1016/j.jafr.2023.100639
  4. Barua, A., Davidson, L. F., Rama, D. V., & Thiruvadi, S. (2010). CFO gender and accruals quality. Accounting horizons, 24(1), 25-39. doi:https://doi.org/10.2308/acch.2010.24.1.25
  5. Betarqi, B. B., & Yunanto. (2024). Penafsiran Hukum Mengenai Kewenangan Notaris dalam Membuat Akta Pertanahan. 2024, 17(2), 683-694. doi:https://doi.org/10.14710/nts.v17i2.48669
  6. Chen, F., Hope, O.-K., Li, Q., & Wang, X. (2011). Financial reporting quality and investment efficiency of private firms in emerging markets. The accounting review, 86(4), 1255-1288. doi:https://doi.org/10.2308/accr-10040
  7. Croson, R., & Gneezy, U. (2009). Gender differences in preferences. Journal of Economic literature, 47(2), 448-474. doi:https://doi.org//10.1257/jel.47.2.448
  8. Dechow, P. M., & Dichev, I. D. (2002). The quality of accruals and earnings: The role of accrual estimation errors. The accounting review, 77(s-1), 35-59. doi:https://doi.org/10.2308/accr.2002.77.s-1.35
  9. Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. Accounting review, 193-225.
  10. Eagly, A. H., & Karau, S. J. (2002). Role congruity theory of prejudice toward female leaders. Psychological review, 109(3), 573. doi:https://doi.org//10.1037/0033-295X.109.3.573
  11. Easley, D., & O'hara, M. (2004). Information and the cost of capital. The journal of finance, 59(4), 1553-1583. doi:https://doi.org/10.1111/j.1540-6261.2004.00672.x
  12. Francis, J., LaFond, R., Olsson, P., & Schipper, K. (2005). The market pricing of accruals quality. Journal of accounting and economics, 39(2), 295-327. doi:https://doi.org/10.1016/j.jacceco.2004.06.003
  13. Gabriella, J., Setiawan, E. B., Octora, T. Y., Kholdun, A. I., & Agusinta, L. (2025). The mediating role of crew health in service quality. Annals of Human Resource Management Research, 5(4), 215-230. doi:https://doi.org/10.35912/ahrmr.v5i4.3410
  14. Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193-206. doi:https://doi.org/10.5465/amr.1984.4277628
  15. Hamsal, H., Nurman, N., Hamzah, Z., Arif, M., & Sukri, A. (2025). Work environment as mediator between workload and health worker performance. Annals of Human Resource Management Research, 5(4), 107-120. doi:https://doi.org/10.35912/ahrmr.v5i4.3300
  16. Indarti, M. G. K., & Widiatmoko, J. (2021). The effects of earnings management and audit quality on cost of equity capital: empirical evidence from indonesia. The Journal of Asian Finance, Economics and Business, 8(4), 769-776. doi:https://doi.org/10.13106/jafeb.2021.vol8.no4.0769
  17. Ishak, J. F. (2024). The Role of Earnings Quality in the impact of Earnings Management and Leverage on Firm Value. International Journal of Financial, Accounting, and Management, 5(4), 433-442. doi:https://doi.org/10.35912/ijfam.v5i4.1204
  18. Jensen, M. C., & Meckling, W. H. (2019). Theory of the firm: Managerial behavior, agency costs and ownership structure Corporate governance (pp. 77-132): Gower.
  19. Karim, L., Morin, H., & Binur, R. E. (2025). Motivation, discipline, and competence: Improving employee performance at the Jayapura Regency Office. Annals of Human Resource Management Research, 5(4), 61-76. doi:https://doi.org/10.35912/ahrmr.v5i4.3307
  20. Karsudjono, A., Kadir, A., Ritawaty, N., Fatih, H. M., & Audah, A. (2025). The role of workforce diversity in shaping employee inclusion in organizations. Annals of Human Resource Management Research, 5(4), 281-299. doi:https://doi.org/10.35912/ahrmr.v5i4.3459
  21. Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of accounting and economics, 39(1), 163-197. doi:https://doi.org/10.1016/j.jacceco.2004.11.002
  22. Lambert, R. A., Leuz, C., & Verrecchia, R. E. (2012). Information asymmetry, information precision, and the cost of capital. Review of finance, 16(1), 1-29. doi:https://doi.org/10.1093/rof/rfr014
  23. Lintner, J. (1975). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets Stochastic optimization models in finance (pp. 131-155): Elsevier.
  24. Nugroho, A. J. S., Marjukah, A., Setyawanti, D., Haris, A., Almasitoh, U. H., & Tasari, T. (2025). A model of student smoking cessation behavior based on pictorial health warnings as an intervening variable. Annals of Human Resource Management Research, 5(4), 1-14. doi:https://doi.org/10.35912/ahrmr.v5i4.3205
  25. Peni, E., & Vähämaa, S. (2010). Female executives and earnings management. Managerial finance, 36(7), 629-645. doi:https://doi.org/10.1108/03074351011050343
  26. Said, M., Setiawan, L., Darmono, D., Paris, A., Sultan, S., & Fahlevi, M. (2025). Exploring factors influencing actual usage of freight forwarding services in Indonesia: A study on desire, outcome expectations, perceived self-efficacy and moderating roles of delivery risk and perceived trust. Decision Science Letters, 14(1), 179-192.
  27. Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The journal of finance, 19(3), 425-442. doi:https://doi.org/10.1111/j.1540-6261.1964.tb02865.x