Female CEOs’ Risk Management and Earnings Performance during the Financial Crisis
46 Pages Posted: 14 Apr 2020 Last revised: 26 Aug 2021
Date Written: March 17, 2020
This paper examines the relationship between female CEOs’ risk management and earnings performance, considering that risk involves a corresponding proportionate return. We find that female CEOs have a positive relationship with the quality of internal control but a negative relationship with profitability during the 2007-2009 financial crisis, which means that the tradeoff between risk and return occurs in a crisis. Nevertheless, female CEOs show no significant relationship with company value. This finding suggests that the tradeoff between risk and return causes offset effects on the firm value during a crisis.
We further investigate whether risk-related motivations influence female CEOs’ risk management performance. We set CEOs’ company-related wealth as a risk-taking motivation, and CEO age and high share ownership as risk-averse motivations. In conclusion, risk-related motivations do not advance risk management performance. This finding calls into question the argument of some literature that women's risk management ability stems from their risk-averse tendency. Notably, the risk-taking motivation positively relates to return of asset and company value, but has a negative effect on company value during a crisis. Moreover, it undermines female CEOs’ risk management during a crisis and dilutes the risk-return tradeoff.
Keywords: Female CEOs, gender, risk, tradeoff between risk and return, financial crisis
JEL Classification: G32, D81, J16
Suggested Citation: Suggested Citation