51 Pages Posted: 7 Jul 2015 Last revised: 10 May 2017
Date Written: May 8, 2017
We find that firms where women have more power in the top management team face fewer lawsuits, mainly those unrelated to securities. We introduce two variables as proxies for women’s power in management: 1) plurality, which indicates the presence of at least two women in the top management team, and 2) the sum of female managers’ pay slices among the top managers. Our finding is robust to alternate specifications such as firm-fixed effects and change regressions. The effect of women executives’ power on lawsuits does not appear to be driven by women’s greater willingness to settle or to settle for larger amounts, but rather by their greater aversion to risky firm policies that are generally value-increasing. Specifically, the intensity of lawsuits is higher in firms with riskier policies such as greater R&D and capital investment and aggressive working capital management, all of which generally increase firm value and litigation risk. Finally, we provide some evidence that women’s power negatively predicts potential disputes underlying lawsuits against firms. Taken together, the negative relation between women’s power in management and lawsuits against a firm appears to be partly explained by women executives foregoing risky and litigation-prone corporate policies.
Keywords: Women executives, Corporate litigation, Corporate policies
JEL Classification: G39, K41, Z10
Suggested Citation: Suggested Citation
Adhikari, Binay and Agrawal, Anup and Malm, James, Do Women Stay Out of Trouble? Evidence from Corporate Litigation and Policies (May 8, 2017). Available at SSRN: https://ssrn.com/abstract=2627846 or http://dx.doi.org/10.2139/ssrn.2627846