Skip to main content

Black woman stands at the head of a conference table and leads a business meeting

Female CEOs issue less company debt than male CEOs, because women are often more risk-averse than their male counterparts and therefore less likely to get the company into financial difficulty.

Research conducted by Dr Yeqin Zeng, Associate Professor of Economics at the Business School, alongside Qi Zhu, Central South University Business School, Yuxuan Huang, Hunan University Business School, and Cheng Yan, Essex Business School, examined the effects of a CEO’s gender on a company’s debt structure.

The researchers examined data from the S&P 1500, the market index of US stocks spanning from 1993 to 2021. With over 28,000 firm observations during this period, the researchers were able to monitor the changes in CEO appointments and over time, as well as the debt structure of each firm, and whether or not this changed dependent on the CEO’s gender and age.

The findings indicated that female CEOs, on average, issued 2.7% less borrowed capital and engaged in financial market activities 2.9% less than companies led by male CEOs, attributed to women's risk-averse nature.

Younger CEOs, the research suggests, are more likely to have more extreme results compared to older CEOs because the potential rewards for risk-taking are higher.  This means male CEOs are more likely to take chances due to potential for a higher reward, whilst female CEOs are less likely to take the chances due to the potentially higher risks to their careers and companies.

“Over the past 20 years we’ve seen an increase from just 0.5% of CEOs in the S&P 1500 being women, to 7% in 2021.” says Dr Zeng.

“Clearly it is a positive that the gender split of CEOs is on the up, but it makes for interesting new challenges for firms when they look at how their company is structured and performs. Our findings show that typically, female CEOs are less likely to get the company in debt, whilst men are more likely to be riskier CEOs”.

Interestingly, the study revealed that the influence of the CEO’s gender is more pronounced in environments with higher market competition and litigation risks. The researchers also found that the gender of the Chief Financial Officer (CFO) had less of an impact on how the firm structures it’s debt – it is the CEO’s gender that really matters.

The researchers concluded that gender significantly influences firm performance and decision-making processes. Companies are encouraged to consider these findings when selecting their next CEO, providing an opportunity to proactively manage debt structures.

More information