Female CEOs’ Risk Management and Earnings Performance during the Financial Crisis
36 Pages Posted: 14 Apr 2020 Last revised: 9 Nov 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. Risk
management and profitability are positively related to each other for the entire sample period,
but the significance of this relationship weakens during the 2007-2009 financial crisis.
Literature suggests that female CEOs show significantly lower financial risk and profitability
in terms of asset allocation. Another literature suggests that female CEOs have a positive
relationship with internal control levels. We find that female CEOs has a significant positive
relationship with the quality of internal control during the crisis but negatively correlated with
ROA. This finding suggests that female CEOs’ risk management during the crisis causes a
tradeoff between risk and return.
We further investigate whether CEOs’ company-related wealth and high stock ownership influence female CEOs’ risk management. Literature shows that CEOs’ company-related wealth triggers risk-taking motivation, and CEOs’ high share ownership causes risk-averse motivations. We find that risk-taking motivation mitigates female CEOs’ risk management during the crisis while risk-averse motivation supports their risk management.
Keywords: Female CEOs, gender, risk, tradeoff between risk and return, financial crisis
JEL Classification: G32, D81, J16
Suggested Citation: Suggested Citation