Female CEOs’ Risk Management and Earnings Performance during the Financial Crisis

36 Pages Posted: 14 Apr 2020 Last revised: 9 Nov 2021

See all articles by SungChang Kang

SungChang Kang

Government of the Republic of Korea - Korea Student Aid Foundation

Doojin Ryu

Sungkyunkwan University

Date Written: March 17, 2020

Abstract

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

Kang, SungChang and Ryu, Doojin, Female CEOs’ Risk Management and Earnings Performance during the Financial Crisis (March 17, 2020). Available at SSRN: https://ssrn.com/abstract=3557015 or http://dx.doi.org/10.2139/ssrn.3557015

SungChang Kang

Government of the Republic of Korea - Korea Student Aid Foundation ( email )

Korea, Republic of (South Korea)

Doojin Ryu (Contact Author)

Sungkyunkwan University ( email )

25-2, Sungkyunkwan-ro, Jongno-gu,
Seoul, 03063
Korea, Republic of (South Korea)

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