Gender Differences in Corporate Financial Decisions and Performance

Abstract

This study examines the financial decisions of female CEOs of the S&P 1500 companies, their operating performance and the market’s evaluation of their presence in these firms. Firms headed by female CEOs hold more cash, maintain lower financial leverage and make lower levels of capital expenditure compared to those with male CEOs. Moreover, firms led by female CEOs have a lower operating performance in terms of industry adjusted ROA and these firms also have somewhat lower systematic risk. Market seems to place less value on firms with female CEOs as manifested by somewhat lower industry adjusted Tobin’s Q and less favorable reaction to the announcements of new female CEOs compared to the announcements of new male CEOs in similar circumstances. These findings are mostly robust to the correction for endogeneity due to omitted variables bias and selection bias, and are consistent both in full sample and matched sample analysis. Overall, this paper provides evidence of greater conservatism of female CEOs in making corporate financial decisions in the setting of United States where corporate ownership is largely separated from control, and contributes meaningfully to the recently growing literature on gender and corporate finance.

Keywords: Gender Differences, Corporate Finance

JEL Classification: G30, G31, G32, J16