CEO Gender, Corporate Risk-Taking, and the Efficiency of Capital Allocation

Abstract

We extend the literature on how managerial traits relate to corporate choices by documenting that firms run by female CEOs have lower leverage, less volatile earnings, and a higher chance of survival than otherwise similar firms run by male CEOs. Additionally, transitions from male to female CEOs (or vice-versa) are associated with economically and statistically significant reductions (increases) in corporate risk-taking. The results are robust to controlling for the endogenous matching between firms and CEOs using a variety of econometric techniques. We further document that this risk-avoidance behavior appears to lead to distortions in the capital allocation process. These results potentially have important macroeconomic implications for long-term economic growth.

Keywords: CEO, gender, risk-taking

JEL Classification: G31, G32, J16