Women or men at the top? Investors don’t care

Only six percent of top executives at listed Dutch companies are women. This is considered problematic, and the Dutch Cabinet would like to see the percentage increase to 30. Investors respond no differently to the appointment of women to top executive jobs in listed companies than to the appointment of men. They judge the qualities rather than the gender of the executive. This is the conclusion of Eline Brinkhuis and Bert Scholtens from the Faculty of Economics and Business at the University of Groningen. ‘From the perspective of the investor, there is therefore no reason for gender to play a role in the appointment of top executives,’ says Scholtens.

Brinkhuis and Scholtens looked systematically at how investors respond to the appointment of top female executives, namely to the roles of CEO (Chief Executive Officer) and CFO (Chief Financial Officer). They used international data to analyse one hundred appointments in which a woman followed a man. They compared investors’ responses to these appointments with their responses to male appointments to such positions in comparable companies (comparable in terms of size, industry and country).

Firm performance

As new appointments and the accompanying investor responses can relate to poor performance by the previous executive, the researchers took firm performance into account. They also considered whether the new executive was an insider or outsider to the company and whether it concerned CEO or CFO. This additional analysis confirmed the conclusion that there was no significant difference in the way in which investors respond to the appointment of top female and male executives. Brinkhuis and Scholtens also studied the effect of the appointment of top female executives in countries that are female friendly and countries that are less so (measured by the Gender Gap Index of the World Economic Forum) and whether US investors responded different that those from elsewhere. Here, there proved to be hardly any difference in response.

Findings contradict prior research

Brinkhuis and Scholtens’ findings contradict those of prior research, which were used to criticize the appointment of top female executives. For instance, Ahern and Dittmar found that investors are very wary of quotas to boost the number of female executives, because they think that this limits companies’ freedom to recruit the best executives. This fear sometimes translates into lower valuation of the firms that are subjected to such quota (Ahern and Dittmar, 2012) In another prior study (Lee and James, 2007) investors in countries that do not have a quota also appeared to respond negatively to the appointment of top female executives. Scholtens: ‘However, prior studies often focus on specific countries and a very limited number of appointments, and appointments of women to supervisory and executive roles usually were lumped together.’

Further information

• Contact: Bert Scholtens , Professor of Sustainable Banking and Finance
• Full publication: Eline Brinkhuis & Bert Scholtens, Investor response to appointment of female CEOs and CFOs. The Leadership Quarterly, DOI 10.1016/j.lequa.2017.08.002

Prior research

• K.R. Ahern and A.K. Dittmar, 2012. The changing of the boards: The impact on firm valuation of mandated female board representation. Quarterly Journal of Economics, 127, 137-197.

• P.M. Lee and E.H. James, 2007. She-E-Os: Gender effects and investor reactions to the announcements of top executive appointments. Strategic Management Journal, 27, 227-241.

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